Europe close: Stock markets take profits as ongoing Greek drama rattles confidence

“The current Greek-debt stagnation, something unlikely to really change by the end of the day, left the Eurozone indices flailing to more losses,” noted Connor Campbell, market analyst at Spreadex.

Despite the broader picture for European markets being one of supportive measures by central banks, sentiment was rattled by concerns that no meaningful progress between EU and Greek lawmakers raises the spectre of a credit default by the country, which involved contagion risks to the wider euro area.

Unsurprisingly, the hesitation around the current political drama taking place in Brussels prompted profit taking across major European markets. Germany’s DAX index led the falls (off 1.3%) followed by France’s CAC-40 (down 0.8%) and the UK’s FTSE 100 (flat). The broader Stoxx 600 index fell 0.8%.

Germany's DAX is up by more than 20% this year on track to record its best quarter in 12 years. The UK market climbed off its all-time highs but remained comfortably above the 7000 mark.

Aside from Monday’s key meeting between German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras, the market focus was on European Central Bank head Mario Draghi’s speech to EU parliament.

Draghi noted that the Eurozone benefiting from weaker euro and inflation is expected to increase gradually toward year-end. He added that ECB stimulus is key factor in Eurozone recovery, with overall program on track to reach EUR60bn for this month. Draghi’s comments were largely in line with his previous comments on monetary policy, thus having little effect on financial markets.

In the currency market, the dollar index - a broad measure of the currency against its major rivals- was down 0.6% at 97.34. That weakness sent the euro back above the $1.09 mark and pushed the Japanese yen to 119.88. The greenback’s weakness on Monday is largely attributable to the volatility caused by the Fed who sparked a dovish tone in a policy meeting last week.

In fixed income markets, German 10-year yield inched up 4 basis points to 0.22%, while yields on Italian equivalents gained 11 basis points to a day's high of 1.31% amid worries about the Eurozone political drama and inflation outlook.

Companies: Talanx earnings disappoint while Pirelli rallies on takeover

Talanx AG shares fell over 4% in Frankfurt after posting full year earnings which contained a reduction to mid-term target from 10% growth to mid-single digit.

In Milan, shares in Pirelli gained over 2% after ChemChina confirmed purchase of the tire-maker at EUR15 per share or EUR7.1bn.

In Madrid, shares in Banco Santander rose 0.3% after the bank reportedly submitted a non-binding offer for Novo Banco in Portugal.

Meanwhile in London, shares in Weir Group declined by 2% after RBC Capital Markets downgraded the stock to a ‘sector perform’ rating.

On the bright side, UK listed bank Standard Chartered shares jumped as high as 8% after it has had its rating promoted to ‘overweight’ from ‘neutral’ at JPMorgan.

Across commodity markets, the weaker US dollar and sustained losses last week helped metals and energy prices to stage a comeback. Copper and silver futures were up 1.1% and 0.6%, respectively while Nymex and Brent crude futures rose 1.8% and 0.5%, respectively.