A slide in bank and mining stocks led European shares to a two-week low on Monday after the US Federal Reserve’s surprisingly hawkish stance on monetary policy last week, while Morrisons surged 31% on hopes of a bidding war to buy out the UK grocer.
The pan-European STOXX 600 index was flat by 0753 GMT after falling to its lowest since June 3 earlier in the session.
The index snapped a four-week winning streak on Friday following signals from the Fed it could raise interest rates much sooner than expected.
Mining stocks fell 0.6% to track a slump in metals prices, while banking shares lost 0.5% as investors booked profits after a run that has lifted them more than 20% this year.
“(Investors are concerned that) the Fed might be acting prematurely,” said Michael Hewson, chief market analyst at CMC Markets UK.
“However, it doesn’t change the fact that the US central bank is still buying $120 billion worth of bonds on a monthly basis and is likely to continue to do so until September at the very least.”
The benchmark STOXX 600 scaled record highs this month after the European Central Bank, in stark contrast to the Fed, said it was premature to discuss tapering its pandemic-era monetary stimulus.
Focus on Monday will be on a speech by ECB President Christine Lagarde to the European Parliament, while later in the week, investors will keep a close eye on business activity data from across the euro zone for clues on whether a recent surge in inflation will persist.
London’s FTSE 100 rose 0.2% to outperform regional bourses. The Bank of England is expected to keep interest rates at a record low when it meets on Thursday.
Shares in Morrisons, Britain’s fourth largest grocer by sales, were up 31.6% after it rejected an offer worth 5.52 billion pounds ($7.62 billion) from private equity firm Clayton, Dubilier & Rice.
Rivals Tesco and Sainsbury’s jumped 2.0% and 3.6%, respectively, while an index tracking UK personal goods and grocery stores stocks rose 2.0%.
Italian-American vehicle maker CNH Industrial slipped 0.8% after agreeing to a deal to buy Raven Industries at an enterprise value of $2.1 billion.