Italian stocks fell, leading declines in fiscally weaker euro-zone countries, after Fitch Ratings lowered its assessment of the country's creditworthiness.
Late Friday, Fitch cut Italy's credit rating by one notch to BBB+ with a negative outlook, noting increased political uncertainty. News of the downgrade reinforced "the perception that the nation, post the recent election, is ungovernable and that a second election is all but certain," said Stephen Pope, managing partner at Spotlight Ideas.
Adding to the gloom was news confirming that Italy's economy contracted 0.9% in the final quarter of last year. On an annual basis, the economy shrank by 2.8%, compared with a preliminary estimate of 2.7%.
Italy's FTSE Mib index fell 0.7% to 16091.98, Spain's IBEX slid 0.0.85% to 8554.40 and Greece's ASE Composite index dropped 2.4% to 929.69.
The market was underpinned by Fiat Industrial, which rose 0.3% after analysts at Deutsche Bank lifted the shares to "buy" from "hold."
In Spain, shares of Banco Santander fell 1.4% and Banco Bilbao Vizcaya Agentaria fell 0.5% even as analysts at Société Générale upgraded it to "hold" from "sell."
Europe's benchmark Stoxx 600 index was weaker as well, dragged lower by the Italian news and disappointing economic statistics from China. The index fell 0.1% to 295.26 after closing on Friday at a 4½ -year high of 295.55. The index has gained ground for three consecutive weeks.
The FTSE 100 index gained 0.3% to close at 6503.63, the French CAC 40 index fell 0.1% to 3836.27 and the German DAX 30 index declined less than 0.1% to 7984.29.
News over the weekend that industrial production in China slowed more than expected in February, while retail sales for the same month also fell short of expectations, weighed on sentiment. Many market commentators said distortions were likely following the country's Lunar New Year celebrations in February, when factories and offices were closed.
Inflation rose to 3.2% in February from 2.0% in January, marking the highest increase since April last year and sparking concerns that Beijing could start monetary tightening.
Among individual stocks, Renault slipped 0.4% after it abandoned plans to produce a large luxury sedan in partnership with Daimler AG. It will instead concentrate on its own product range.
Betting and gambling firm Ladbrokes shot up 6.5% after it confirmed that it will be extending its relationship with software-platform developer Playtech Ltd.
Light, sweet, crude for June delivery was down 0.6% at $91.39 per barrel on the New York Mercantile Exchange as European markets closed. Gold futures were flat at $1,577.90 a troy ounce on Nymex's Comex division