European shares closed lower on Monday after German finance minister Wolfgang Schaeuble said it was unrealistic to expect a definitive solution to the eurozone debt crisis at an EU summit this weekend. The pan-European FTSEurofirst 300 index of top shares fell 1 percent to 966.04 points. Trading volume was 85 percent of the index's 30-day average.
The index, down more than 13 percent in 2011 on worries about the eurozone debt crisis and weak global growth, hit a 10-week high earlier in the session, having been boosted in recent weeks on optimism that policymakers were acting to tackle the crisis. It turned negative after Schaeuble's remarks.
Heavyweight banks were among the biggest fallers, with the STOXX Europe 600 Banking Index down 1.6 percent, with Italy's UniCredit falling 6.1 percent, though it is still up nearly 40 percent from a low it hit last month. Banks have gained sharply in recent weeks on confidence that governments would help in re-capitalising them. Greek banks fell 7.3 percent, with Schaeuble remarking that there may be a need to further restructure Greece's public debt, and for the country to undertake fiscal and structural reform.
The benchmark index fell further away from 981.9, the 38.2 percent Fibonacci retracement level of its fall from a 2011 high hit in February to a low in September. The next support level, on this line, is the 23.6 percent retracement at 932.7. Some stocks continue to look cheap, though strategists said the wider macroeconomic environment was prompting caution. Equity valuations on Thomson Reuters Datastream showed the STOXX Europe 600 carrying a one-year forward price-to-earnings of 8.3 against a 10-year average of 13.2.
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