- Eurozone inflation falls
- US said to be in talks with Iran to aid Iraq
- Russia cuts off gas supply to Ukraine
- IMF downgrades US growth forecast
FTSE 100: -0.34%
CAC 40: -0.73%
FTSE MIB: -0.86%
IBEX 35: -0.95%
Stoxx 600: -0.45%
European stocks slumped as tensions in Iraq grew and as a report confirmed Eurozone inflation fell in May.
The US is reportedly considering talks with Iran to support the Iraq government in their fight against Sunni Islamist insurgents.
The news comes after militants from the Islamic State of Iraq and the Levant (ISIL) routed Baghdad's army and seized the north of the country.
Concerns over the unrest's impact on oil supplies have pushed prices higher. Brent crude futures rose $0.504 to $113.030 per barrel in afternoon trading, according to the ICE.
Also weighing on stocks, Russia's OAO Gazprom cut off gas supplies to Ukraine after saying it hadn't received any payments before a deadline of 10:00 Moscow time. The energy company will continue to supply its customers in the European Union through the same pipeline. The state-run firm warned the European Commission of possible risks to the transit of gas before the announcement.
In the Eurozone, consumer price figures were unrevised at 0.5% in May, falling from 0.7% in April, as expected, well below the European Central Bank's (ECB) 2% target.
"All in all, today's release was largely within our expectations, confirming that euroarea inflation remains weak," Barclays Research said. "We expect 2014's average to be 0.6% and look for inflation to stay at around these levels until the end of the year."
The ECB earlier this month cut interest rates and the deposit rate in an effort to curb weak inflation and boost the stagnant recovery.
IMF cuts US growth forecast
The International Monetary Fund (IMF) has cut its projection for economic growth this year to 2% from 3%, due to the impact of the harsh winter. The Washington-based lender still sees that economy expanding 3% next year. The IMF said the forecasts mean the Federal Reserve may have scope to keep interest rates at zero for longer than investors expect.
Meanwhile, US industrial production grew 0.6% last month following a 0.3% fall in April, exceeding forecasts for a 0.5% increase.
Separate data showed manufacturing output climbed 0.6% in May after a 0.1% drop a month earlier, in line with analysts' estimates.
BT Group declined after the Sunday Times reported that the former state-run firm may have to increase payments to its company pension plan.
Telecom Italia SpA dropped as Mediobanca SpA said it will withdraw from Telco SpA, an investment vehicle that owns 22.4% of Telecom Italia, according to Bloomberg data.
Actelion gained after saying its experimental treatment for a lung disease met the main goal of a late-stage study.
The euro rose 0.26% to $1.3575.