Euro shares drop on Spanish worries, profit taking; DAX off 0.11%

Investing.com - European stocks closed down Monday, as deep seated worries over the handling of Spain's financial crisis weighed on sentiment, while investors took profits after equities were recently boosted by the announcement of fresh monetary easing by the Federal Reserve. 

At the close of  European trade, the EURO STOXX 50 dropped 0.42%, France’s CAC 40 slumped 0.78%, while Germany’s DAX 30 fell 0.11%.

Investors remained cautious as Spain's government faced protests over the weekend against public spending cuts, even as Madrid told its European partners that its next steps to overhaul the economy would avoid further cuts in public spending. 

Earlier Monday, European Central Bank policymaker Ewald Nowotny reminded Spain that it needs to apply for a rescue package to qualify for the central bank’s bond-buying program, while Reuters reported that Spanish Prime Minister Mariano Rajoy is set to unveil a further economic reform package late September.

Stocks rallied broadly on Friday after the Fed announced that it would buy USD40 billion of mortgage-backed securities every month and would keep buying them until the job market improves. 

Spanish lenders led losses in the financial sector, as Banco Santander saw shares plummet 1.75% and BBVA plunged 1.35%.

Other financial stocks remained mixed, as shares in French lenders BNP Paribas and Societe Generale advanced 0.65% and 0.32%, while Germany's Deutsche Bank tumbled 1%.

Elsewhere, commodity-linked stocks were also broadly lower, as steelmaker SSAB dove 7.81% after saying that demand for strip products has been much weaker than expected in the third quarter and warned that falling iron ore prices will hurt earnings in the first quarter of next year. 

ThyssenKrupp, Germany’s biggest steelmaker, also lost 2.99% as UBS AG downgraded the stock to sell from neutral, while France-based ArcelorMittal plummeted 2.80%

In London, commodity-heavy FTSE 100 declined 0.37%, weighed by sharp losses in mining stocks and as industry data showed that house prices in the U.K. declined in September.

Mining giants Rio Tinto and BHP Billiton declined 0.75% and 0.31% respectively, trimming earlier losses, while steel manufacturer Evraz pushed lower, with shares tumbling 2.30%. 

Oil major Anglo American was also on the downside, as shares plunged 1.39%, while rival group BP added 0.31% amid reports it is talks to sell some of its Gulf of Mexico oil fields to Plains Exploration & Production for roughly USD7 billion.

Meanwhile, U.K. lenders remained mixed, as shares in the Royal Bank of Scotland tumbled 1.54% and Barclays retreated 0.55%, while HSBC Holdings dropped 0.38% and Lloyds Banking Group gained 0.57%.

Elsewhere, mobile-phone operator Vodafone plunged 1.01% after CEO Andy Halford said in an interview the company may make a provision to cover legal risks relating to a USD2.2 billion tax bill in India. 

In the U.S., equity markets followed lower with the Dow Jones off 0.23%, the broad based S&P 500 down 0.18% and the tech heavy Nasdaq lower by 0.25%.

Investors are anticipating the TIC long term purchases from the U.S., the German ZEW economic sentiment report, and the BOE inflation letter on Tuesday.