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Europe: Shares fall as growth worries grip

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European shares fell on Monday, with banks leading the decline, as worries that the protracted US-China trade war could push the global economy into recession sent investors scurrying to safer assets.

[BENGALURU] European shares fell on Monday, with banks leading the decline, as worries that the protracted US-China trade war could push the global economy into recession sent investors scurrying to safer assets.

Worsening protests in Hong Kong and a collapse in the Argentine peso added to the downbeat mood around the globe.

The pan-European STOXX 600 index pared early gains to close 0.3 per cent lower, extending last week's 1.7 per cent loss when worries over an escalation in trade tensions and Italy's political turmoil had weighed on sentiment.

A Goldman Sachs warning over the weekend that fears of the already prolonged trade war leading to recession are increasing and that a trade deal was unlikely before the 2020 US presidential election, saw investors move to safe havens such as the Japanese yen, gold and bonds.

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Germany's Ifo survey echoed the growth concerns with its measures for current conditions and economic expectations both having worsened in the third quarter.

Last week's dire industrial output data from Germany and the UK economy's first contraction since 2012 were the latest evidence of growth pangs in Europe, with German economy's growth numbers due on Wednesday being the next gauge.

"Every piece of news we're seeing out of Europe in bearish," said Jonathan Bell, chief investment officer at Stanhope Capital, pointing also to the European Central Bank's disappointing stance at its last meeting.

The dour sentiment recently has seen bond yields dive and banks take a beating. On Monday, Europe's banking index lost 1.8 per cent to hit an over three-year low.

Spain's lender-heavy main index led losses in the region, down 0.9 per cent, with Credit Suisse saying Spanish banks' sensitivity to rates and lack of visibility call for adopting a more cautious stance, adding to the gloom.

Another catalyst for markets this week could be the US Federal Reserve's annual symposium where investors hope to get some clarity on the future path of interest rates.

On the corporate front, the bidding war for Osram ramped up after Swiss-listed sensor specialist AMS said it was ready to pay 10 per cent more than Bain Capital and Carlyle .

Osram, which is grappling with weakness in the automotive industry and a broader economic slowdown, is seen as a potential supplier for connected and autonomous cars.

Osram shares were up 10.4 per cent, while AMS's 11.8 per cent decline was the most on STOXX 600.

Britain's Tullow Oil jumped as much as 20 per cent after it announced a major oil discovery in the Orinduik block in Guyana.

Among decliners, miners pushed the basic resources index 0.4 per cent lower as iron ore and copper prices fell.

REUTERS