Edinburgh - European shares dropped on Monday, hit by concern over the pace of global growth after data showed Japan, the world's third-largest economy, unexpectedly slipped into recession.
The FTSEurofirst 300 index of top European shares was down 0.3 percent at 1,341.10 points.
Japan's economy shrank an annualised 1.6 percent in July-September, following a 7.3 percent drop in the second quarter that was hurt by a sales tax hike hitting consumer spending.
Analysts polled by Reuters had expected 2.1 percent growth in the third quarter. But consumption and exports remained weak, saddling companies with huge inventories.
Shares in Hennes & Mauritz, the world's second-biggest fashion retailer, bucked the European trend, rising 1.7 percent after it posted a 14 percent rise in October sales from a year ago, beating forecasts.
Andrew Milligan, head of Global Strategy at Standard Life Investments, said that an encouraging earnings season in Europe pointed to strong economic fundamentals which should help a recovery in European equities before year-end.
“A major political shock could stop a recovery in its tracks. But the economic fundamentals are generally positive,” Milligan said, giving geopolitical tension with Russia over unrest in Ukraine as one example.
“Nobody says that Europe and Japan are going to grow strongly into 2015, but it doesn't look like they're on the verge of an extended slow down - rather they've been hit by temporary factors like Ukraine and the sales tax increase.”
The FTSEurofirst 300 has rallied over 10 percent from its October low, but remains around 5 percent off its high for the year, hit in September.
The STOXX energy sector index has tumbled 20 percent since late June, tracking a slump in crude prices which has sparked speculation that big energy majors will suspend a number of projects and slash capital expenditure.
Japan's data hit Brent crude, down more than $1 to near $78 a barrel, further pressuring shares in European oil majors and oil services groups.
Weir Group fell to a 2-1/2 year low, down 3.7 percent and the FTSEurofirst's top faller after a double-downgrade from Exane, who warn that the current oil price could trigger 25 pct reduction in rig count.
Reuters