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[LONDON] European shares fell to their lowest level for more than three months on Monday, hit by a sell-off in cyclical stocks and widespread unease in markets over a possible British exit from the European Union.
The pan-European FTSEurofirst 300 index closed 1.9 per cent lower at 1,284.36 points after hitting its lowest since late February and extending the previous session's 2.3 per cent drop. The Stoxx Europe 600 ended 1.8 per cent lower, while Italy's FTSE MIB closed down 2.9 per cent.
European shares came under further selling pressure following a risk-off pattern in global markets as investors positioned for central bank meetings this week and the referendum on Britain's EU membership set for June 23.
"We're in uncharted territory in front of the Brexit vote, and then there's also the Fed this week. So the wall of worry is quite high at the moment. All the banks are a little bit lower, and they're the ones which are likely to get hit," Lontrad managing director, Zeg Choudhry, said.
"For the next two weeks, you've got to be slightly mad if you've not got your money in defensive stocks." One poll in Britain, out after the market closed on Friday, gave the "out" campaign a 10-point lead, though two subsequent polls over the weekend painted a mixed picture of which side will win.
Bookmakers still believe that the referendum is likely to result in a vote to remain in the EU, although the probability of an "In" vote has dropped 10 percentage points from last week.
Before then, the US Federal Reserve, Bank of England, Swiss National Bank and the Bank of Japan are all expected to hold monetary policy steady against a backdrop of caution heightened by the Brexit issue.
However, some fund managers said they would continue to focus on market fundamentals and not get distracted by noise around the referendum.
"We won't be partaking in any knee-jerk reactions, either before or after the referendum," Hargreaves Lansdown fund manager, Lee Gardhouse, said.
"At present we consider UK and European markets to be reasonable value versus their history, but not a bargain. We do however believe that equities remain appealing on a relative basis, when compared to bonds and cash."
Cyclical stocks - sensitive to economic shifts - were the biggest fallers, with the auto and bank sectors down 2.1 and 2.9 per cent respectively. Commodity stocks also came under pressure, with miners down 1.1 per cent and oil and gas shares down 1.5 per cent.
Among individual movers, mid-cap company G4S fell more than 5 per cent after Sunday's shootings in Orlando.
The man who shot 50 people dead was employed by G4S and had undergone company screening in 2013 with "no findings", G4S said on Sunday. Traders said it would dent G4S's reputation in the United States, where it generates a major part of its revenue.