European shares fell on Monday as
weak-looking business updates from companies such as media group
Pearson and Norwegian seafood company Marine Harvest
weighed on the market.
The pan-European STOXX 600 index was down by 0.5
percent, with the index down by around 8 percent so far in 2016.
Pearson fell around 10 percent, the worst performer on
Britain's FTSE 100 and on the STOXX 600, after the
company warned of tough trading conditions, even though cost
cuts enabled it to maintain its full-year outlook.
"We see that there is a risk that the tight cost controls
could end up exacerbating the lack of growth risk. We remain
sellers of Pearson," said Gary Paulin, head of global equities
at Northern Trust Capital Markets.
Marine Harvest shares also fell 4.2 percent after the
company cut its 2016 output guidance.
However, Italian bank stocks rose, although the FTSE All
Italia Banks index remains down nearly 50 percent so
far in 2016 on concerns over Italian banks' bad debts.
The Italian banking sector was buoyed by merger activity,
with UniCredit confirming it was in talks to sell its stake in
Bank Pekao, while shareholders approved plans for a
merger between Banco Popolare and Banca Popolare di Milano.
Nevertheless, equity markets were also dented by comments
late on Friday from U.S. Federal Reserve Chair Janet Yellen,
whose remarks on the need for aggressive steps to rebuild the
U.S. economy boosted long-dated U.S bond yields.
Bond market jitters in Germany and Britain, with Britain's
10-year government bond yield rising to its highest level since
the day in June when the country voted to leave the European
Union, also weighed on stock markets.
British gilt yields have risen sharply over the past couple
of weeks as investors anticipate a sharp bout of inflation in
Britain, fuelled by the pound's nosedive to all-time lows
against a basket of currencies.
Analysts said the plunge in sterling caused by concerns over
a so-called "hard Brexit" - in which Britain leaves the EU's
single market in order to impose controls on immigration -
remained a cause of broader concern for European markets.
"I still see plenty of downside for these markets, given the
fears over a hard Brexit," said Berkeley Futures' associate
director Richard Griffiths.