European shares drop as investors avoid big bets

The pan-European STOXX 600 closed down 0.5% at 571.68 points

European shares slid on Monday, as investors avoided big bets ahead of jobs report from the U.S. that could offer clarity on the health of the country’s economy.

The pan-European STOXX 600 closed down 0.5% at 571.68 points. Other regional indexes also dropped, with Germany’s DAX down 1.2%.

Elsewhere, worries that an interest rate cut by the U.S. central bank may not be imminent and that technology shares are overvalued had sparked a global selloff last week; equities in Europe logged their biggest daily loss in over a month on Friday.

Risk appetite this week is likely to be tested by the September U.S. jobs report, due on Thursday, and an earnings report from Nvidia due on Wednesday.

Japan moved to tamp down an escalating dispute with China over Taiwan that has prompted Beijing to urge citizens to halt travel to its East Asian neighbour.

The biggest issue for Europe is this sort of war of words that we’ve seen between China and Japan over Taiwan. We’re seeing the luxury sector, Chinese-related stocks are coming under pressure because of that, said Fiona Cincotta, senior market analyst at City Index.

European luxury stocks such as UK’s Burberry and France’s LVMH dropped, declining 6.6% and 2%, respectively.

Financial stocks including banks and insurers also weighed on the STOXX index on Monday. Retail sector slid 2.3%, with JD Sports down 4.7%.

British advertising giant WPP’s shares gained 11% after a report said it had attracted takeover interest from French rival Havas and some private equity firms.

FLSmidth & Co slipped 6.4% after the Danish industrial company announced CEO Mikko Keto would be stepping down and leaving.

Also, the euro zone economy will grow faster than expected in 2025, the European Commission forecast on Monday.