MILAN European shares fell on Monday, hit by losses among miners and banks after U.S. President Donald Trump's failure to pass his healthcare bill raised worries over his ability to deliver on fiscal stimulus promises.
The STOXX 600 index fell 0.5 percent by 0953 GMT. The pan-European index has risen around 10 percent since Trump was elected president in early November, partly in anticipation of a big economic stimulus under his administration.
But Trump suffered a big setback on Friday in a Congress controlled by his own party when Republican leaders withdrew legislation to overhaul the healthcare system.
"No doubt this is likely to put a lid on the recent rally," Markus Huber, trader at City of London Markets, said.
"However it needs to be seen if this will result in a 'correction' or if traders are willing to hold out and see if Trump will have more success with his next bill."
The Basic Resources index was the biggest sectoral loser, down 1.9 percent to a two-week low, as copper prices slipped following Trump's healthcare setback. The banking index was down 1.2 percent. [MET/L]
Bucking the weaker trend were precious metal miners such as Randgold and Fresnillo, both up more than 1 percent and among the few gainers on the STOXX, as risk appetite fell, boosting gold which is seen as a safe haven asset.
In spite of the pull-back, the STOXX index remains just 1.3 percent below its highest levels in 15 months and some investors believe that prospects for equities in the region remain good thanks to solid economic data and earnings.
A German survey showing that business morale in Europe's largest economy improved unexpectedly in March added to signs that the economic backdrop was improving, but European indexes remained in the red, as risk-off sentiment prevailed.
Germany's blue chip DAX index fell 0.5 percent, although coming a bit off lows following the survey's release.
Morgan Stanley on Monday lifted its earnings forecasts and targets for European benchmark indexes, citing a stronger-than-anticipated economic recovery and the return of inflation. It also reiterated its "overweight" recommendation on financials.
International Consolidated Airlines was the biggest individual faller in Europe, down 3.6 percent after Bank of America Merrill Lynch cut its rating on the owner of British Airways to "underperform" from "buy".
Zodiac Aerospace rose 2.3 percent after an upgrade from Credit Suisse to "outperform" on bets Safran would revise its bid and reject calls to abandon takeover plans following another profit warning at the aircraft seats maker earlier this month.
(Reporting by Danilo Masoni; Editing by Andrew Heavens)