- US government faces shutdown
- German retail data misses forecasts
- Eurozone inflation rises less than estimated
- Italy's political future hangs in the balance
- Portuguese government loses municipal elections
- Troika has made "good progress" in visit to Greece
FTSE 100: -0.84%
CAC 40: -1.21%
FTSE MIB: -1.77%
IBEX 35: -1.13%
Stoxx 600: -0.70%
Concerns over a potential US government shutdown, weaker-than-expected German data and political turmoil in Italy pushed European stocks lower at the midday mark on Monday.
The US faces its first government shutdown in 17 years unless it passes a last-minute bill on the budget by the end of Monday.
Policymakers have so far failed to reach an agreement on a new spending bill and have until midnight to make a decision. As well, within the next fortnight they must also iron out an extension to the current debt-ceiling limit of $16.7tn, which might threaten a full-blown default.
As part of its own 2014 Budget proposal the Republican controlled House of Representatives on Sunday voted to delay Barack Obama's signature healthcare reforms. The Senate, which is in the hands of the Democrats, is likely to strike it down.
"This is just one example of the games still being played in Congress, as we approach the deadline, and both parties are as guilty as each other for creating so much uncertainty for the financial markets," said Market Analyst Craig Erlam from Alpari.
By some economists´ estimates a shutdown would reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on the length of a closure.
Also weighing on stocks on Monday was disappointing German retail sales figures. Sales climbed by 0.3% in August on the year, compared to July when it fell 0.2%, but missed consensus for an increase of 0.6%.
Another report showed Eurozone inflation increased in September, the lowest rate since February 2010. The consumer price index (CPI) rose 1.1% year-on-year this month, down from 1.3% in August. Economists had pencilled in a 1.2% increase.
The decline was driven by energy and food prices. However, core inflation, which excludes food, alcohol and tobacco was also down 1% from 1.1%.
The news could encourage the European Central Bank to cut interest rates again if the recovery across the Eurozone stalls.
"September's Eurozone flash CPI figures confirmed that the ECB enjoys plenty of room to loosen monetary policy further," according to Capital Economics.
Italy's political crisis rattles markets
Italy is facing international pressure if the current political crisis continues and spills over to the rest of the Eurozone, Labour Minister Enrico Giovannini said on Sunday.
Silvio Berlusconi took five of his ministers out of the cabinet over the weekend, putting Prime Minister Enrico Letta's government in a difficult position.
Letta has announced plans to rally support from rebel members of Berlusconi's party and opposition politicians to win a vote of confidence on Wednesday avoid elections. However, the government´s ability to pass the structural macroeconomic reforms which are deemed neecssary will be impaired as a result, says Royal Bank of Scotland´s Alberto Gallo.
Italian 10-year government bond yields pushed higher to 4.65% early on Monday.
Italian banks UniCredit SpA and Intesa Sanpaolo SpA fell as the nation's benchmark FTSE MIB Index sank amid the political turmoil.
Mining stocks fall on Chinese data
A gauge of miners fell, including Fresnillo and Anglo American, after Chinese manufacturing data missed analysts' estimates.
China's manufacturing gauge rose to 50.2 in September, down from 50.1 in August, according to a Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics. Economists predicted a reading of 51.2. A reading above 50 signals expansion.
Telecom Italia advanced amid rumours that Chief Executive Officer Franco Bernabe will resign.
Crop chemicals supplier Syngenta declined after Citigroup downgraded its rating on the shares
to 'neutral' from 'buy', citing the impact of lower grain prices.
Other asset classes slide
The euro fell 0.18% to the 1.3498 US dollar.
Brent crude futures dropped $0.807 to $107.760 per barrel on the ICE.