- Merkel fails to win majority in German election
- ECB's Draghi speaks
- Eurozone PMI data
- Investors turn to US Fed speeches
FTSE 100: -0.28%
CAC 40: -0.05
FTSE MIB: -0.12%
IBEX 35: 0.30%
Stoxx 600: -0.11%
European stocks slumped on Monday as German Chancellor Angela Merkel failed to secure enough votes to win a majority in the country's federal election.
Merkel will need to find a coalition partner after her Christian Democratic Union gained 41.5% of votes - falling short of the required amount to win her third term as leader of Europe's largest economy.
The chancellor's current coalition partner, the Liberal Democrats, will not be represented in parliament as they missed the 5% minimum threshold.
She will have to build a new coalition with either the Social Democrats which won 25.7% or the Green party which won 8.4%.
Looking ahead, European Central Bank President Mario Draghi will speak on Monday afternoon.
Last Monday he told a conference in Berlin that a single authority was needed in Europe to restore the Eurozone's banking sector.
"We need a mechanism that allows non-viable banks to be wound down without financial stability risks, as we see in the US," he said.
His remarks came two days after Germany said the idea was legally questionable, putting him on a collision course with the country.
Draghi added that despite market improvements, the "recovery is only in its infancy". He said the economy remains fragile and unemployment is still too high so the ECB expects key interest rates to remain at present of lower levels for an extended period of time.
Also high on the European agenda is the release of a Purchasing Managers' Index (PMI) Manufacturing report which is expected to show an increase to 51.7 in September from 51.4 the previous month. A reading above 50 signals expansion.
The PMI Composite is pegged to rise to 51.7 this month from 50.5 in August while PMI Services is anticipated to rise to 51 from 50.7.
In China PMI manufacturing rose to a six-month high in September of 51.2 compared to 50.1 in August and an estimate of 50.9.
Fed speeches after stimulus announcement
Federal Reserve Bank of Atlanta President Dennis P. Lockhart, Fed Bank of New York President William Dudley and Fed Bank of Dallas President Richard Fisher will speak later Monday.
Stocks rose strongly following Wednesday's surprise decision by the Federal Reserve to keep up its $85bn monthly asset purchases until it sees further economic recovery.
However, gains were mostly erased by the end of the week after James Bullard, head of the St Louis Fed, said that a tapering could come in October.
Bullard admitted that this month's decision to maintain quantitative easing was a close call and that the central bank could still trim asset purchases at its next meeting.
Investors will now turn to speeches from three other Fed policymakers for an indication of what's to come.
Centrica, A.G Barr
declined after announcing a £240m non-cash write off on gas storage projects.
Drinks group A.G BARR slumped after the soft drinks company said it expects general trading "to remain challenging".
Dairy foods company Dairy Crest gained after saying it continues to perform in line with company expectations despite the challenging trading environment.
Animal genetics group Genus fell after announcing the acquisition of Génétiporc, the porcine genetic business of Aliments Breton Foods Group, for £25m.