- German factory orders fall
- German exports rise
- US debt ceiling woes continue
- Clegg slams Cameron's EU/UK referendum
FTSE 100: -0.78%
CAC 40: -0.43%
FTSE MIB: -0.07%
IBEX 35: -0.48%
Stoxx 600: -0.43%
European stocks dragged as German factory orders fell unexpectedly and as the US government stalemate continued.
German factory orders declined in August by 0.3% from July when they dropped a revised 1.9%, the Economy Ministry said. Economists had pencilled in a 1.1% increase.
The report supported the European Central Bank's view that economic recovery in the euro area is fragile.
Separate data from the Federal Statistics Office showed German exports rose slightly in August to widen the trade surplus. Seasonally-adjusted exports gained 1% on the month, while imports were up 0.4%.
The data comes amid political uncertainty in Germany over which party Chancellor Angela Merkel's Christian Democrats will form a coalition with in order to end a hung parliament following the September 22nd federal election.
Opposition party Social Democrats have signalled their readiness to join the conservative Christian Democrats while a top aide for Merkel has suggested a partnership with the Greens was a realistic possibility.
US debt ceiling looms
The US government shutdown is in its second week as lawmakers continue to wrangle over the federal budget and the impending so-called debt ceiling.
Congress has until October 17th before it reaches its $16.7bn borrowing limit.
The Treasury is expected to run out of cash to pay its bills at some point between October 22nd and October 31st.
President Barack Obama on Monday stood his ground, saying that he will not negotiate with Republicans over policy conditions tied to the budget including his healthcare bill 'Obamacare' and to raise the borrowing limit.
Majority Leader Harry Reid has called for the Senate to consider a "clean" increase of the debt ceiling.
"The longer this goes on, the more we're going to see this uncertainty in the markets turn into negativity," said Craig Erlam, Market Analyst at Alpari.
"The closer we get to the October 17th deadline, the more investors will begin to question whether the US will actually do the right thing in the end. I still believe that no one in their right mind would allow the US to hit the debt ceiling, causing havoc in financial markets and risking sending a number of countries, including the US itself, back into recession.
"A deal will surely be done in the end, which delays the debt ceiling being hit until the end of the year in exchange for some cuts to spending, although Obamacare will likely be spared."
The shutdown, which began after the government failed to agree on a budget bill by last Monday's deadline, has stalled the release of economic reports in the world's biggest economy.
Clegg attacks Cameron on EU/UK plans
Liberal Democrat leader Nick Clegg has accused Prime Minister David Cameron of "playing with fire" over his plans to reform Britain's relations with the European Union (EU).
The Deputy Prime Minister said it would be "economic suicide" for Britain to leave the EU and slammed Cameron's proposed referendum as a "short sighted political calculation".
"It is playing with fire and, if we go down this track, it is Britain that will get burned, he said in a speech at the London headquarters of Swiss technology firm Buhler Group.
In January Cameron vowed to negotiate a new EU deal for Britain and hold an "in-out" referendum on EU membership by the end of 2017.
The issue has divided the coalition and impinged on Cameron's chances of re-election in 2015.
Telecom Italia slips
Telecom Italia declined after S&P said it was likely to reduce its BBB-long-term rating, the lowest investment grade, to BB+ after concluding a review of the phone company by the end of next month.
Alcatel-Lucent gained following reports the company plans to cut 10,000 jobs.
TGS Nopec Geophysical dropped after saying sales for the full year will be between $810m and $870m, down from a previous forecast for a range between $920m and $1bn.
UK house builders Barratt Developments and Taylor Wimpey advanced after the house-price gauge from the Royal Institution of Chartered Surveyors rose in September to 54, the highest since June 2002, from 41 in August.
Panmure Gordon also raised its rating on Taylor Wimpey to 'hold' from 'sell'.
Strategists at Credit Suisse have upped the weighting of Continental European stocks in their model portfolio to 12% overweight from 7% earlier.
Other asset classes mixed
The euro fell 0.07% to the 1.3572 US dollar.
Brent crude futures rose $0.868 to $110.640.