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Europe: Shares slip on weaker commodities, M&A optimism limits losses

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[MILAN] European shares ended lower on Monday, weighed down by losses among commodities-related stocks and financials, though speculation about merger and acquisition activity offered some support with Vodafone among the leading gainers.

Vodafone rose 1.3 per cent after the British phone group said it was in talks to merge its Indian unit with Idea in an all-share deal that could help counter fierce competition.

"Something had to be done and this merger might be the way to strengthen Vodafone's hand in the Indian price war," said ETX Capital analyst Neil Wilson.

However, the Stoxx 600 closed 1.1 per cent lower, the biggest one-day drop since November, with the mood among investors dampened after US President Donald Trump introduced a travel ban, increasing concerns about the impact of his policies on global trade and the economy.

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But despite those losses, the pan-European index is still up 0.3 per cent so far in January and set for its third straight month of gains.

The surge seen in recent weeks had reflected optimism over Mr Trump's plans to boost the economy with tax cuts and deregulation, as well as a good start to the earnings season and growing merger speculation.

On Monday M&A talk lifted shares in British engineering firm Atkins WS, which jumped 6 per cent on a report of a US$4 billion merger approach from US company CH2M.

But the M&A-related optimism was more than offset by weakness among oil and gas and mining stocks, both down more than 2 per cent, after crude prices fell and copper eased below eight-week peaks.

Oil majors BP, Total and Royal Dutch Shell were down between 1.1 and 2.2 per cent, while oil products storage company Vopak and refiner Neste, down 7 per cent and 2 per cent respectively, were both hit by a Goldman Sachs downgrade to sell.

But an upgrade to buy from UBS lifted shares in Germany's Software, which surged 5.5 per cent to top gainers on the Stoxx.

Banks were dragged down by a 5.5 per cent drop in UniCredit. Italy's biggest bank said its end-2016 capital ratios would not meet requirements set by the European Central Bank as it prepares to launch a 13 billion euro (S$20 billion) rights issue to boost its financial strength.

UniCredit put pressure on the FTSE MIB, down 3 per cent, making the Italian blue chip index the biggest faller among major national indexes in Europe. Italian banks fell nearly 4 per cent to a six-week low.

REUTERS

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