File picture: Alex Grimm

London - European stocks fell on Tuesday after a survey found German business morale was flagging, raising concern over growth in Europe's largest economy.

Sterling weakened after dovish remarks by the head of the Bank of England.

Germany's Ifo index of business sentiment fell more than expected in June to its lowest this year, leading shares to give up gains they had scored on talk of mergers and acquisitions.

The FTSEurofirst 300 index of leading shares dropped 0.2 percent to 1385 points, Germany's DAX was down 0.1 percent at 9912 points and France's CAC 40 was up 0.1 percent at 4520 points.

Britain's FTSE 100 fell 0.25 percent to 6783 points.

“You are seeing economic statistics in Europe that are disappointing,” said Francois Savary, chief investment officer at Swiss bank Reyl.

“There is nothing major, but I think it is time for a period of some consolidation on the markets.”

Economists at Barclays said the Ifo data and Monday's surprisingly soft manufacturing PMI figures suggest German growth in the current cycle has peaked.

The losses offset renewed talk on Tuesday of merger and acquisition activity.

Agrochemicals company Syngenta surged as much as 6.5 percent on a media report that Monsanto had considered buying it in a deal worth $40 billion.

Syngenta shares were last up 4.5 percent.

“Our outlook for equity markets for the remainder of the year is positive. M&A has made a welcome return in recent months,” said Mark Burgess, the chief investment officer at Threadneedle Investments.

Earlier, the majority of markets in Asia edged higher after a sluggish start.

The MSCI broadest index of Asia-Pacific shares outside Japan rose 0.3 percent.

Japan's Nikkei added a slender 0.05 percent.



The biggest mover in currency markets was sterling, which fell below $1.70 and from its recent five-year highs.

The pound weakened after Bank of England Governor Mark Carney told UK lawmakers the UK economy was seeing little wage or inflationary pressure.

He also said spare capacity will need to be absorbed before interest rates rise.

That appeared to cool expectations UK interest rates would be raised this year - expectations that were fueled by comments from Carney himself earlier this month.

“An early rate hike may not be a done deal as yet,” said Valentin Marinov, the head of G10 currency strategy at Citi.

Sterling was last down 0.2 percent at $1.6995.

It had earlier fallen more than half a cent, to as low as $1.6971.

The euro was up slightly at $1.3617 and the dollar down against the yen at 101.85 yen, leaving the dollar index a little lower at 80.212.

That was well within the narrow 80.000-81.000 range seen since May.

In commodity markets, oil eased down from recent nine-month highs after data on Monday showed that Iraq's oil exports neared

record levels in June, around 2.53 million barrels a day, despite the Sunni Islamist insurgency sweeping through the


Brent crude oil futures dipped below $114 a barrel, on track for the third straight day of decline, something not seen for a month.

US oil futures were down 0.2 percent at $105.90 a barrel.

“The supply news isn't really supporting oil prices. The only thing supporting them is the fear factor,” said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt.

Spot gold rose to its highest in more than two months, to $1,325 an ounce, for gains so far this month of around $75.

Silver rose to its highest since March, above $21 an ounce.

US Treasury bonds rose, pushing the 10-year benchmark yield down almost three basis points to 2.59 percent. - Reuters