The European markets closed lower on Monday as investors remained cautious ahead of Tuesday's U.S. presidential election. Investors across the globe are nervous as to how the U.S. will contend with an automatic $600 billion in spending cuts and tax hikes at the end of the year — known as the fiscal cliff — after the election.
The FTSEurofirst 300 Index provisionally closed down 0.6 percent at 1,108.90 points.
"People are pausing ahead of the election and what that means for the fiscal cliff," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
Opinion polls show the race between President Barack Obama and Republican challenger Mitt Romney remains neck-and-neck at the start of the last day of campaigning.
Beyond The US Election
While monitoring the outcome of the tight race for the White House, investors were mindful of developments in the euro zone debt crisis and the leadership transition in China and their impact on the global economy.
It was expected that Greek Prime Minister Antonis Samaras' coalition will muster enough support on Wednesday to win a vote on structural reforms and a follow-up vote on Sunday on an
"The concern remains the euro debt crisis and the continuing problems regarding Greece," said Matthew Lifson, senior trader and analyst at Cambridge Mercantile Group in Princeton, New Jersey.
French industrialist Louis Gallois, the former EADS chief executive, called for a "patriotic" effort to reverse declining competitiveness via "shock therapy" as he handed in a review, commissioned by France's socialist government on Monday.
On Thursday, China's ruling Communist party will begin the 18th congress in its history with the culmination a week later in the expected selection of Xi Jinping to succeed President Hu Jintao.
World leaders gathered at the G20 meeting in Mexico. World Bank President Jim Yong Kim told the meeting on Sunday that the bank had been asked for technical advice from stricken euro zone countries Greece and Portugal, the first time for decades that developed countries have asked it for advice.
Leaders at the summit this weekend also pressed the United States to act decisively on the tax and spending issues.
Banks Lead European Losses
HSBC closed 1.3 percent lower, taking the most points off the FTSEurofirst 300, after the British bank said a U.S. fine for breaching anti-money laundering rules could cost it
HSBC's problems knocked other bank stocks, with the STOXX 600 European banking index falling 1.1 percent to make it the worst-performing equity sector.
Downward pressure on the index also came from Lloyds Banking Group, which closed over 1 percent lower after reports in the Sunday Times newspaper that the bank is considering a sale of its 60 percent stake in St James's Place Wealth Management.