European shares hit a five-week closing low on Monday as a cut in credit ratings for Greece and a "negative" outlook for Italy raised concerns about the eurozone's continuing debt crisis. Charts sent a near-term bearish signal and the Euro STOXX 50 volatility index jumped 11 percent to a two-month high, indicating a fall in investors' appetite for equities. But a fund manager said longer-term market outlook stayed positive.
The FTSEurofirst 300 index of top European shares finished 1.7 percent weaker at 1,116.52 points, the lowest close since mid-April. It turned negative for 2011 and was down 0.5 percent. Autos, banks and commodities were among the top losers. Sentiment also worsened following dismal data showing the global economic recovery remained fragile and as a setback seen by Spain's ruling Socialists in regional and municipal elections put more pressure on the government, which is fighting to avoid having to seek a bailout like Greece, Ireland and Portugal.
Italy's FTSE MIB fell 3.3 percent and Greek shares dropped 1.3 percent. The Thomson Reuters Peripheral Eurozone Countries Index was down 3.5 percent. Automobile shares featured among the biggest losers, with the Stoxx Europe 600 sector index falling 2.9 percent, on concerns about global demand for vehicles on disappointing macroeconomic data.
The Euro STOXX 50 index fell 2.1 percent to 2,794.26 points. According to chart analysts the index has a strong support at 2,710, which, if cleared, will put a large head and shoulders pattern into play, with the measuring targets at 2,560 and 2,450. The Stoxx Europe 600 banking sector index fell 2 percent. France's Credit Agricole, one of the most exposed banks to Greece, dropped 3 percent. Commerzbank's fell 5 percent on announcement of a larger than expected discount on a sale of new shares.