Europe close: Profit-taking in banks and oil stocks weigh on markets

European stocks were weighed down by profit-taking in bank and oil sector stocks on Monday, as investors' focus began to shift to this week’s European Central Bank meeting.

The benchmark DJ Stoxx Europe 600 index slipped 0.25%, while Germany’s DAX and France’s CAC 40 ended the day with losses of 0.46% and 0.32%, respectively.

Crude oil futures were in the black, with West Texas Intermediate gaining 4.1% to $37.46 a barrel as of 16:47GMT and Brent futures up by an identical percentage to $40.38.

Despite those advances, the Stoxx 600 sub-index of Oil&Gas stocks closed up by just 0.27% to 272.97, although the sector gauge for Basic Resource companies fared better, clocking in with an advance of 3.02% to 292.91.

The Stoxx 600 sub-index for bank stocks retreated 1.01% to 153.81 points, led by shares in Italian lenders.

Over the weekend, China outlined plans for an economic expansion of between 6.5% to 7% this year, down from last year’s target of around 7%.

Nonetheless, an increase in the target for China's public spending deficit in 2016 to 3.0%, up from last year's level of 2.3%, and plans to cut overcapacity in the country's steel industry led to a so-called 'short-squeeze' in iron futures, which jumped 19% on Monday - the largest one day gain since 2009 - to ht $63.74 per tonne.

In corporate news, shares in EDF tumbled after the French energy company confirmed that chief financial officer Thomas Piquemal has quit.

Although the group did not give a reason for his exit, a media report over the weekend suggested he was leaving due to concerns over the Hinkley Point nuclear plant.

Stock in Spain's FCC shot up on news that Mexican billionaire investor Carlos Slim had launched a bid for the Spanish infrastructure construction group.

German chemicals group BASF turned around late in the day to trade higher after a poor start to the session on the heels of a report it was considering a counter bid for US rival DuPont, which has already agreed a merger with Dow Chemical.

In London, Barclays was under the cosh after Deutsche Bank cut its rating on the stock to ‘hold’ from ‘buy’, while Anglo American slid after UBS downgraded it shares to ‘sell’ from ‘neutral’.

On the upside, Old Mutual surged after the insurer said it was considering all the options available under its strategic review amid media reports it was planning a multi-billion pound break-up.

Earlier, data from Destatis showed German manufacturing orders slipped 0.1% in January from the previous month amid lower domestic demand. Although this was not as bad as the 0.3% drop economists had been expecting, Pantheon Macroeconomics said the figures highlighted sluggish manufacturing.

The focus this week will be on the ECB rate announcement and ensuing press conference on Thursday.

Deutsche Bank said expectations are once again running high ahead of the meeting but some caution is warranted.

It said the market was pricing in a 13 basis points facility cut, a six-month extension of quantitative easing and a €10bn increase in the pace of QE.