UKX FTSE 100 Index

By William Watts, MarketWatch

Norsk Hydro soars on news of plant partially reopening

European stocks fell Monday, with Italian banks under heavy pressure as continued worries over a budget clash between Rome and the European Union contributed to a continued selloff in the country's government bonds.

Extending earlier losses, the pan-European Stoxx 600 Europe index dropped 1.1% to 372.12, with European markets seen, in part, taking a cue from Asia, where Chinese stocks dropped more than 3% (http://www.marketwatch.com/story/asian-markets-lag-as-chinese-stocks-fall-after-weeklong-layoff-2018-10-07) after returning from a weeklong holiday. Losses picked up some after U.S. markets opened sharply lower.

In London, the FTSE 100 shed 0.9% to 7,251.44. In Germany, the DAX was off 1% at 11,994.39, while in Paris, France's CAC 40 shed 1.2% to 5,299.50.

A weak reading on German industrial output (http://www.marketwatch.com/story/german-output-falls-for-third-straight-month-2018-10-08), which saw a 0.3% fall in August and defied expectations for a rise, may also have contributed to the weaker tone, analysts said. But a sharp selloff for Italian bonds and stocks was also in focus.

Read:Italy bond yields jump as investors brace for budget clash (http://www.marketwatch.com/story/italy-bond-yields-jump-as-investors-brace-for-budget-clash-2018-10-08)

"The selloff in Asia may have been enough to weigh on risk appetite in Europe but as it turns out it doesn't need much help, with the coalition Italian government's determination to collide with Brussels over its budget plans causing more than enough of a stir in the region," said Craig Erlam, senior market analyst at Oanda, in a Monday note.

Italy's FTSE MIB stock index dropped 2.4%, leaving it down more than 4% so far in October versus a 2.6% fall for the Stoxx 600. A runup in Italian bond yields has been fueled by concerns about the government's spending plans, which have put it on a collision course with Europe and stoked fears of downgrades and further damage for Italy's still fragile lenders.

Shares of Intesa Sanpaolo SpA dropped 3.9%, while UniCredit SpA (UCG.MI) declined 3.7%.

"The Italian banks hold about 10% of their assets in Italian sovereigns, on average. I issue a warning, once again. Watch out here!!!" wrote Mark Grant, chief global strategist at B. Riley FBR, in a note.

A pullback in oil prices weighed on producers, with BP PLC(BP.LN) off 2% in London, while Royal Dutch Shell PLC (RDSA.LN) (RDSA.LN) shed 1.2%.

Norsk Hydro ASA (NHYDY) shares jumped 4% after the company said it has been given authorization in Brazil (https://www.hydro.com/en/press-room/Archive/2018/alunorte-situations-news/alunorte-receives-authorization-to-utilize-press-filter-as-first-step-to-resume-operations/) to use press-filter technology as a first step in reopening a refinery days after saying it would halt production and layoff over 4,000 people. Aluminum prices in London fell 4% on the news.

Shares of Airbus SE (AIR.FR) fell nearly 1% (http://www.marketwatch.com/story/airbus-looks-likely-to-name-no-2-guillaume-faury-its-new-chief-executive-2018-10-08). The Wall Street Journal reported that the world's second-largest planemaker after Boeing Inc. (BA) would name Guillaume Faury as its next chief executive, replacing Tom Enders, who said in December he wouldn't seek a new mandate when his term expires next year.

-- Barbara Kollmeyer contributed to this report

(END) Dow Jones Newswires

October 08, 2018 09:59 ET (13:59 GMT)

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