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London - Europe's main stock markets fell for a third day on Monday, weighed down by concerns the US and Europe could toughen their sanctions against Russia, and by escalating violence in Gaza.
Markets have been spooked by escalating tensions between the West and Russia after the downing of a Malaysian airliner last week and Israel's increasingly bloody ground offensive in Gaza.
Frankfurt's main DAX index slipped 1.11% to 9 612.05 points, compared to Friday's closing levels. Earlier it breached 9 600 for the first time in two months.
London's benchmark FTSE 100 index closed 0.31% lower at 6 728.44 points, while in Paris the CAC 40 ended the day down 0.71% at 4 304.74.
"European shares started the week undoing some of Friday's relief rally as uncertainty surrounding the downing of Malaysian airliner MH17 and the increasing death toll in Gaza fed into a negative tone," said Jasper Lawler at CMC Markets.
"German producer prices were flat in June in another sign that some of the heat was coming out of the German economy and the increased sanctions on Russia, one of its biggest trading partners, are not helping future prospects."
British Prime Minister David Cameron said the EU was ready to toughen sanctions against Moscow over the Ukraine plane disaster barely a week after the latest round of embargoes against Russia.
Russia hit back, with a senior military official saying Russian records showed that a Ukrainian Su-25 battle jet had flown close to the Malaysian passenger jet before it crashed.
Malaysian Airline's flight MH17 is believed to have been blown out of the sky on Thursday by a surface-to-air missile, killing all 298 passengers and crew.
The Moscow stock market sank for a sixth day as investors were alarmed by the escalating crisis in Ukraine and the prospect of tougher sanctions doing more damage to the Russian economy.
"Scenes of conflict dominate news screens at present, be they in Gaza, Syria or Ukraine, and the result for financial markets has been an outbreak of risk aversion," said Chris Beauchamp at financial spread-betting firm IG.
"The possibility of fresh sanctions against Russia are dominating the news in Europe, which accounts for why the DAX is suffering more heavily than the FTSE, given Germany's close trading links with the Russian bear."
The tensions with Russia also weighed on US stocks, which opened lower as investors eyed the conflicts at the start of a busy week of corporate earnings.
In mid-afternoon trading, the Dow Jones Industrial Average was down 0.52% to 17 011.88.
The broad-based S&P 500 declined 0.42% to 1 969.82, while the tech-rich Nasdaq Composite Index gave up 0.36% to 4 416.22.
Shares in Julius Baer ended up 8.34% after the Zurich-based bank said it expected to strike a deal with US authorities over a tax evasion investigation by the end of the year.
Tesco shares gained 1.28% after the struggling British supermarket announced its chief executive would be replaced Unilever director and turnaround specialist Dave Lewis in October.
Anglo American shares climbed 0.55% after the miner announced its platinum division would it would offload some of its South African mines after a debilitating five-month wage strike.
Asian markets ended Monday mixed, as bargain-hunting was offset by lingering geopolitical concerns after last week's Ukraine airplane crash.
Sydney added 0.15% and Seoul was marginally lower, while Shanghai lost 0.22% and Hong Kong shed 0.29%. Tokyo was closed for a public holiday.
The European single currency was flat from $1.3524 late in New York on Friday.
The British pound slipped to $1.7060 from $1.7088 on Friday. The euro rose to 79.27 pence from 79.14p.
In commodity deals, gold increased to $1 311.50 per ounce from $1 307.25 on Friday.
