European shares ended a five-day winning streak on Monday as a slump in Barclays, after a shareholder sold warrants in the bank, resulted in it leading both financial stocks and the broader market lower. The FTSEurofirst 300 index closed down 0.5 percent at 1,104.65 points, giving up some ground after rising 4 percent last week. The euro zone's bluechip Euro STOXX 50 index also slipped 0.6 percent to 2,542.52 points.
The STOXX Europe 600 banking index was Europe's worst-performing equity sector, dropping by 1.2 percent. British bank Barclays led fallers, down 5.4 percent after Qatar cashed in its warrants, resulting in the sale of some 300 million Barclays shares. Barclays also experienced heavy trading volumes, with volumes coming in at 287 percent above their 90-day average.
Francois Savary, chief investment officer at Swiss bank Reyl, said European banks would remain prone to sell-offs while European authorities continued to struggle to agree on measures to fix the region's sovereign debt crisis. "We are still cautious on European banks. There is still a lot of trouble with creating a European banking union," he said. Persistent worries over Spain and Greece further highlighted investors' expectations that the strong run on European equities last week was coming to a halt as investors looked to sell stocks bought during that time for a profit.
Separatist parties from Spain's Catalonia area won regional elections over the weekend, which might hinder any Spanish request for a sovereign bail-out, while European authorities are still to agree a deal on releasing aid to Greece, which is struggling to meet the terms of its own sovereign rescue deal. "We're not taking on too much risk at the current point. I do think last week's rally was overdone and the upside is limited," said Central Markets senior trader Joe Neighbour.
Neighbour sold Germany's DAX equity index, which closed down 0.2 percent at 7,292.03 points, at 7,300 points and said he would use rallies in the stock market to book profits by selling stocks, due to the uncertain economic backdrop. "We're wary of the whole situation," he said. KBL Switzerland chief investment officer Philippe Carette, however, said he would not go too "short" on European equity markets for now.
Carette, whose favoured stocks include healthcare companies Roche and Novartis, and luxury goods stocks LVMH and Richemont, said European markets could rise further in December. He said the traditional Christmas year-end rally and a possible deal to avert the US "fiscal cliff" of spending cuts and tax increases due to take effect in early 2013 could spur equities higher in the final few weeks of the year. "Although I am cautious on the European equity markets, I would not be too 'short' on the market at present," he said.
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