European shares slip on weaker commodities, M&A optimism limits losses

By Danilo Masoni

MILAN (Reuters) - 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 (VOD.L) among the leading gainers.

Vodafone rose 1.3 percent after the British phone group said it was in talks to merge its Indian unit with Idea (IDEA.NS) 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 (.STOXX) closed 1.1 percent lower, the biggest one-day drop since November, with the mood among investors dampened after U.S President Donald Trump introduced a travel ban, increasing concerns about the impact of his policies on global trade and the economy.

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

The surge seen in recent weeks had reflected optimism over 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 (ATKW.L), which jumped 6 percent on a report of a $4 billion merger approach from U.S. company CH2M.

But the M&A-related optimism was more than offset by weakness among oil and gas (.SXEP) and mining (.SXPP) stocks, both down more than 2 percent, after crude prices fell and copper eased below eight-week peaks. [O/R] (MET/L]

Oil majors BP (BP.L), Total (TOTF.PA) and Royal Dutch Shell (RDSa.L) were down between 1.1 and 2.2 percent, while oil products storage company Vopak (VOPA.AS) and refiner Neste (NESTE.HE), down 7 percent and 2 percent respectively, were both hit by a Goldman Sachs downgrade to sell.

But an upgrade to buy from UBS lifted shares in Germany's Software (SOWG.DE), which surged 5.5 percent to top gainers on the STOXX.

Banks (.SX7P) were dragged down by a 5.5 percent drop in UniCredit (CRDI.MI). 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 rights issue to boost its financial strength.

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

(Additional reporting by Atul Prakash; Editing by Gareth Jones and Pritha Sarkar)