Oil Stocks, Commerz Drag Down Euro Stocks

European shares fell on Monday, led by weaker commodity stocks tracking falling oil and metals prices, while Commerzbank slipped 10 percent after it agreed to buy Dresdner Bank from Allianz.

The FTSEurofirst 300 index of top European shares closed unofficially down 0.4 percent at 1,189.64 points after falling as low as 1,180.48.

Commodities stocks came under pressure as crude prices fell 4 percent after concerns eased that Hurricane Gustav would cause severe damage to the U.S. oil sector as the storm did not pick up strength as it barrelled towards the Louisiana coast.

BP, Royal Dutch Shell, gas producer BG Group and Tullow Oil shed between 1.7 and 4.5 percent.

Mining stocks were also hit as copper prices fell nearly 3 percent, nickel dropped 5 percent and zinc slipped 2 percent.

Shares in BHP Billiton, Anglo American, Vedanta Resources, Lonmin, Kazakhmys, Xstrata, Antofagasta and Rio Tinto fell between 1.4 and 5.8 percent.

Commerzbank led the decline in banking stocks and fell 10.2 percent after agreeing to buy Dresdner Bank from Allianz in a $14.5 billion all-German deal that will break the country's banking mould and cost 9,000 jobs.

"On a first glance we don't like the transaction at all," said DZ Bank, and Heino Ruland, analyst at FrankfurtFinanz, said Commerzbank shareholders would "suffer for a number of years."

"The price paid by Commerzbank is at the high end but not outside the expected range. The main problem is the execution risk and how the two are going to bring the operating costs together," said McAlinden.

LSE, Enterprise Inns, Miners Hit

London Stock Exchange fell 2.6 percent after the Financial Times said the exchange operator would introduce deep fee cuts and incentives for traders.

And Enterprise Inns fell 2.5 percent as traders said the company is being hit by falling property prices and high debt levels and investors stay cautious ahead of a busy earnings week for the pub sector.

French tire-maker Michelin was a standout gainer, rising 5.5 percent as traders cited a Merrill Lynch upgrade.

The FTSEurofirst 300 has fallen 21 percent so far this year, hit by big losses at banks due to the credit crisis and by a slowing in the economy.

Oil prices are well off their record above $147 a barrel in July, and though they have since come off sharply, analysts say this is not going to be enough to boost third-quarter earnings.

"We've had a minor rally due to the oil decline, but oil's back to April/May levels and that's not really a stabilizing factor for trend growth," said Franz Wenzel, strategist at AXA Investment Managers in Paris.