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* STOXX Europe 600 falls 1.8 percent
* U.S. rate hike in September seen possible
* Volatility spikes after quiet summer
* Third straight session of losses after ECB
* E.ON drops after Uniper spin-off
By Alistair Smout
LONDON, Sept 12 European shares sank in early
deals on Monday, tracking falls in Asia and on course for their
biggest drop in nearly three months as investors took bets on a
possible near-term rate hike in the United States.
Stocks and bonds had sold off in Asia, with markets also
questioning whether global central bank stimulus programmes were
reaching the limits of their effectiveness.
Europe's STOXX 600 was down 1.8 percent in a broad-based
selloff as the growth-sensitive basic resources sector
slumped 3.7 percent, the worst performer. Bank stocks
fell 2.6 percent.
Three Federal Reserve officials were set to speak on Monday,
with some investors speculating that they would lay the
groundwork for a rate hike as early as next week.
"Market participants ...believe that a September hike is
possible," said Ana Thaker, market economist at PhillipCapital
UK, saying that market volatility would have only a limited
impact on the Fed's decision.
"I think the Fed will take into account the market's move.
However, I don't think they can afford to base their decision on
Earlier this month the STOXX 600 hit its highest level since
January, driven by a rally of more than 10 percent from lows hit
after Britain voted to leave the European Union.
But it fell for a third straight session on Monday, with the
European Central Bank having disappointed markets with a less
dovish outcome to its policy meeting on Thursday than had been
"There is a sense that central banks are running out of
ammunition, and running out of things they can do," Thaker said.
Volatility, an indicator of investor nervousness,
jumped to its highest level since early August, having been low
for much of the summer.
The rise of quantitative and algorithmic trading, aided by
persistently low volatility, has made market pullbacks swifter
than they used to be, said JCI portfolio manager Alessandro
"The problem is always forecasting the right timing and
this, instead, has become harder in the current financial
universe, more and more driven by the search of a yield that is
disconnected from fundamentals," he said.
German-listed E.ON was the top faller, down 12.3
percent after it spun off its Uniper division, while Linde
dropped 8.1 percent after its Praxair merger fell
Associated British Food fell 6.7 percent after its
results, with traders citing weak trading for its flagship
Primark business, despite the company lifting its outlook for
the second time in two months.
(editing by John Stonestreet)