Europe close: Geopolitics weigh on stocks in the new quarter

European equity markets lost ground at the start of the new quarter as news broke that two blasts had rocked the St.Petersburg metro and some US data came in wide of the mark, weighing on the greenback.

Germany’s Dax ended the day down by 0.45% to 12,257.20 after having neared a record high earlier in the session on the back of encouraging manufacturing data.

Meanwhile, the benchmark Stoxx Europe 600 index lost 0.49% to 379.29 and France’s CAC was down 0.71% at 5,085.91.

As if that were not enough, the early morning news-flow was dominated by warnings a looming diplomatic spat between the UK and Spain on account of Gibraltar's future following Brexit.

In currency markets, the euro was flat versus the dollar ekeing out a gain of 0.06% to 1.0669 and up 0.81% against the pound to 0.8555.

"Early gains slipped away by the afternoon following some disappointing manufacturing data and reports of deadly explosions on the St Petersburg subway.

"Germany’s DAX was the exception to the rule of lacklustre trading in Europe, coming within a whisker of its all-time high. The German index seems to have gained a new lease of life since Angela Merkel’s party had its run-way election victory in the state of Saarland. Political stability in Europe passed its first test after the Dutch election, making European shares look relatively more attractive than US peers," said Jasper Lawler, senior market analyst at London Capital Group.

IHS Markit's US manufacturing purchasing managers' index fell from a reading of 54.2 for February to 53.3 in March (consensus: 53.5).

Monday's worse than expected data on US factory activity came alongside unexpected falls in US auto sales data from a raft of carmakers, including Ford which reported a 7.2% drop in light vehicle sales for March and GM which said US auto sales rose by just 1.6%, well below the 7% analysts had expected.

On the European data front, led by Germany, the Eurozone manufacturing purchasing managers’ index rose to 56.2 in March from 55.4 the month earlier, in line with consensus forecast and a near six year high.

German manufacturing PMI increased to a record high of 58.3 from 56.8, pointing to a rise in capital expenditure and production in the first quarter, while the French PMI rose to 53.3 from 52.2 in February, slightly lower than the 53.4 forecast.

Eurozone unemployment improved to 9.5% in February from 9.6% in January, as largely expected.

Investors were also looking ahead to Thursday’s release of the ECB’s minutes of the last meeting in March. Peter Praet, the central bank’s chief economist, said monetary policy is still required even though deflationary pressures have waned.

Meanwhile, oil prices were relatively steady as investors kept an eye on exports after Iraq told Opec that it would meet the terms of the agreement to reduce oil production. Last year the cartel, along with Russia, agreed to curb supply in a bid to increase pieces.

West Texas Intermediate was down 0.52% at $50.34 per barrel and Brent crude was 0.55% lower to $53.25.

In corporate news, Banco Popular Español sank 10.44% after it said there needed to be adjustments made to its accounts for previous years following an internal audit.

Schneider Electric was off 0.45% after the French said it will sell its US data software business DTN to Swiss-based TBG for around $900m.

Sartorius slipped 0.48% after the German biotech firm said full year sales could rise between 12% to 16%, higher than the previously expected.