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* Chip, luxury and banking stocks drag
* STOXX 600 holds near 11-week lows
* Global airlines project sharp reduction in losses next
year
* Morrisons rallies on $9.5 billion bid
(Updates to close)
By Sruthi Shankar and Susan Mathew
Oct 4 (Reuters) - European stocks struggled on Monday after
their worst weekly showing since February, hit by a growing
number of risks including signs of inflation, elevated bond
yields and developer China Evergrande's financial troubles.
The pan-European STOXX 600 index fell for a third
straight session, down 0.5%, holding near 11-week lows hit in
last week's selloff.
A move into the black during the session on a materials
stocks rally was outweighed towards close as falls in
technology stocks intensified after peers on Wall Street
were pressured by an uptick in Treasury yields.
Banks and luxury stocks also lost on fears of a
slowdown in global growth, as China, the world's second largest
economy, deals with fresh COVID-19 restrictions, a property
sector slowdown and regulatory clampdowns.
French luxury goods makers Kering and LVMH
, which draw a major portion of their revenue from
China, fell 1.3% and 1.4%, respectively.
"Investors should brace for more stock market volatility
throughout October, which is also a seasonally turbulent time
for stocks, as worries about inflation, supply chain issues,
China and (U.S. Federal Reserve) policy are still with us," Jay
Pestrichelli, chief executive of investment firm ZEGA Financial,
said.
A survey showed investor morale in the euro zone fell to
its lowest level since April in October on dimming economic
expectations.
STOXX 600 has dropped about 5% from a record high hit in
August due to signs of slowing growth and inflation. BofA Global
Research last week predicted a nearly 10% drop by year-end,
given a shift in the macro backdrop towards "anti-goldilocks".
Morrisons dropped 3.7% after U.S. private equity
firm Clayton, Dubilier & Rice (CD&R) won the auction for the
British supermarket group with a 7 billion pound ($9.5 billion)
bid.
Rivals Tesco and Sainsbury gained 1.5% and
3.4%, and along with a rally in oil stocks, helped UK's FTSE 100
cap losses.
UK telecoms group BT Group fell 4.7% after media
reports said Sky was closing in on broadband investment deal
with Virgin Media O2, which analysts at Jefferies said could
threaten BT's Openreach.
BT expects Sky to need to use the telecom provider as its
partner for full fibre services, a person familiar with the
situation told Reuters.
Airline stocks including Ryanair and British
Airways-owner ICAG rose 3% and 0.1% following reports
that the UK will open up more countries for hotel
quarantine-free travel later this week.
Global airlines on Monday projected a sharp reduction in
industry losses next year, but revised up the financial toll
inflicted by the pandemic.
(Reporting by Sruthi Shankar and Susan Mathew in Bengaluru;
Editing by Saumyadeb Chakrabarty, Rashmi Aich and Andrew
Heavens)
