Europe open: Stocks retreat as autos under pressure

European stocks fell in early trade on Monday with auto issues under the cosh as investors digested the latest data on the eurozone manufacturing and services sectors.

At 1045 BST, the Stoxx Europe 600 index was down 0.5%, while Germany's DAX and France's CAC 40 were off 0.8% and 0.4% respectively.

David Madden at CMC Markets said: "European equity markets are offside today as traders are still spooked by Friday’s sell-off. The major decline that we witnessed at the end of last week rattled dealers and that bearish sentiment hasn’t gone away. The announcement from Ryanair that fares could be cut to order to fend off competition has put pressure on the entire airline sector. The strength of the euro is still causing problems for Continental equity markets."

Autos were under pressure after the EU antitrust body confirmed it is investigating allegations of collusion between the big car manufacturers over diesel emission treatment systems and cost agreements. The Stoxx 600 autos and parts index was down 2.1%.

On the data front, surveys released by from Markit showed eurozone services and manufacturing sector growth remained strong in early July, though both came in slightly less strong than expected.

A preliminary, or 'flash', euro area manufacturing purchasing managers' index for July showed a slight easing back to 56.8 from 57.4 in June, falling short of the consensus forecast of 57.2.

The eurozone manufacturing PMI was at its lowest since January, but still well up on the 50.0 reading that separates growth from contraction.

The eurozone services PMI for July, also produced by Markit, remained at 55.4 for a second month, though the market had expected it to improve slightly to 55.5.

The headline composite PMI declined to 55.8 from 56.3, below the consensus forecast of 56.2.

Economists said the composite PMI looks consistent with quarterly gross domestic product growth of about 0.6% for the eurozone.

Investors were also mulling over news that the International Monetary Fund has downgraded its economic growth forecasts for the UK and the US this year. It cut its UK growth expectations to 1.7% from 2% and its estimate for the US to 2.1% from 2.3% earlier.

In corporate news, Ryanair flew lower despite reporting a jump in profit for the three months to the end of June, after the budget carrier warned it could cut fares by up to 9% on some routes as competition in the industry intensifies.