Europe close: China property weakness, government bond yields weigh on stocks

European shares extended losses on Monday as worries about China's troubled property sector continued, with developer Evergrande saying it would not be able to complete a planned restructure, while rising oil prices and weak German survey data also weighed on sentiment.

Rising government bond yields in the US and UK also hampered risk appetite.

"The new week has picked up where the last one left off. Stocks have dropped further in trading today, as the Fed’s ‘higher for longer’ rhetoric continues to prompt a flight from risk," said IG chief market analyst Chris Beauchamp.

"September’s reputation as one of the worst months for stocks will have been bolstered by the last four weeks of trading. A fresh climb in yields only adds to the stock market’s woes, as investors come to realise that when Powell says ‘higher for longer’, he really means it."

The pan-European Stoxx 600 was down 0.62% at 450.44, with all major regional bourses lower.

Overnight, shares in Shanghai fell 0.54%, with Evergrande stock down 22%.

Ten-year German bund yields edged up by just one basis point to 2.802%, but those similarly-dated US Treasuries and UK Gilts climbed further.

The developer said on Sunday that it could not meet the qualifications for the issuance of new notes as its principal subsidiary, Hengda Real Estate Group, was being investigated.

In Germany, business morale deteriorated in September, falling for the fifth month in a row, according to the Ifo institute's business climate index, which fell to 85.7 from a revised August figure of 85.8 but above the 85.2 forecast by analysts.

Companies were less satisfied in September than in the previous month with their current business situation, with the sub-index falling to 88.7 in September from 89.0 in August.

Oil gained was little changed by the end of the session, with benchmark Brent Crude at $93.36 dollars a barrel, after falls last driven by fears of weaker demand.

"The problem facing all the central banks is the rise in the oil price which if it continues unchecked could choke off any semblance of a rebound in economic activity. With Brent crude prices at 10-month highs and core inflation still uncomfortably high the price for keeping a lid on inflation could well see current interest rate levels remain higher for a lot longer," said CMC Markets analysts Michael Hewson.

In equity news, SBB shares rose 18% as the Swedish property group announced on Sunday it would reorganise its business, securing an 8bn crown cash boost and ending a strategic review.

SBB, under pressure to cut its debt amid soaring interest rates, said in May it might sell all or parts of its business, but talks to divest its remaining 51% stake in education subsidiary EduCo later collapsed.

Gambling operator Entain fell 13% after warning on third quarter net online gambling revenues.