By Shreyashi Sanyal and Sruthi Shankar
(Reuters) - Germany's main share index fell over 1% on Monday, leading European markets lower after business activity readings from across the euro zone suggested growth had ground to a halt.
Surveys showed growth in services and manufacturing in the euro zone, Germany and France had all stalled in September, fanning concerns of a slide towards recession and suggesting further support for the economy is required.
Euro zone stocks (STOXXE) slipped 1.1%, while Germany's DAX index (GDAXI) tumbled 1.4% as the latest survey of purchasing managers showed its manufacturing sector sinking deeper into recession.
Banks were among the worst hit, with the eurozone banking index (SX7E) slumping 2.6%, including a more than 5% fall for Germany's Commerzbank (DE:CBKG). [GVD/EUR]
The pan-European STOXX 600 index (STOXX) fell nearly 1%.
"A sense of caution is spreading across the board here and is putting pressure on European markets and this may well continue," said IG Markets analyst Chris Beauchamp
Investors also remained worried by mixed signals from U.S.-China trade talks.
Over the weekend, the U.S. Trade Representative's office issued a brief statement describing the two days of talks with China as "productive." Wall Street had fallen, however, on Friday after a Chinese agriculture delegation canceled a planned visit to U.S. farm states.
Market participants are still unconvinced that a trade deal between the two countries is likely anytime soon.
"What we'd like to see is concrete progress and that is the thing we're lacking," Beauchamp said.
Early market action showed investors again turning to defensive sectors such as utilities (SX6P) and food and beverage (SX3P), which were among the few gainers across the main European sub-sectors.
The travel and leisure sector (SXTP) gained 0.3% with a number of tour operators and airlines gaining from expectations their businesses will benefit from the collapse of British rival Thomas Cook (L:TCG).
Shares of TUI (L:TUIT) jumped 6.6%, the most on the STOXX 600, while EasyJet (L:EZJ) and Ryanair Holdings (I:RYA) were close behind.