Europe close: Stocks erase gains as investors show nerves ahead of US elections

European stocks lost steam on Monday afternoon as earlier gains faded and global markets turned red ahead of Tuesday's US presidential election.

After a positive start, the pan-European Stoxx 600 slipped 0.3% by the close to 509.21, having now fallen in four of the past five sessions. Indices across Paris, Frankfurt, Milan and Madrid were all lower, while London's FTSE 100 outperformed with a gain of just 0.1%.

Wall Street's benchmarks opened mixed but had quickly turned negative by midday in New York, as investors reduced their appetite for risk ahead of Tuesday, which has the potential to cause big swings in the equity, currency and bond markets.

While polls are still yet to identify a clear favourite, financial markets have been pricing in a win by former president Donald Trump, with the 'Trump trade' – a stronger dollar, weaker bonds and stronger crypto – having performed well in recent weeks.

However, the Trump trade was slowly unwinding on Monday as investors scaled back positions, with 10-year US Treasury yield slumping 10 basis points and the US dollar index dropped 0.4%.

Meanwhile, oil prices surged on Monday on the back of concerns about Iran's response to continued Israeli attacks, along with the decision by OPEC+ to delay planned output increases by a month. Brent crude was up 2.4% at $74.88 a barrel by the close in Europe.

In economic data, the S&P Global-HCOB eurozone manufacturing PMI improved to 46.0 last month, up from 45.0 in September and the highest level reached in five months. Nevertheless, the index still remained firmly entrenched in negative territory, coming in below the neutral 50-point mark for the 28th straight month.

Meanwhile, investor sentiment in the eurozone improved for the second month running in November, with the Sentix Investor Confidence index rising to -12.8 from -13.8 in October though slightly behind the -12.5 expected by analysts. However, despite the improvement month-on-month, Sentix said that "no positive turnaround scenario can be derived" from the data.

Market movers

Swedish carmaker Volvo jumped 5% after reporting a 10% increase in global car sales for October, with fully electric vehicle sales surging 29% year-on-year to account for 18% of total sales.

Burberry shares were 5% higher on the back of speculation that Italian luxury fashion group Moncler could launch a takeover offer for the British counterpart following a sharp decline in the share price this year.

Shell, BP, TotalEnergies and Repsol were putting in decent gains as the oil majors followed crude prices higher.

London and Dublin-listed Ryanair flew higher despite cutting full-year traffic forecasts and reporting a drop in first-half profits after taking a hit from lower fares and Boeing delays.

Anglo American gained after the A$1.6bn (£0.8bn) sale of its 33.3% stake in the Jellinbah joint venture in Australia as part of its strategy to exit the steelmaking coal industry. The London-listed miner said the process to offload the rest of its steelmaking coal mines is "now at an advanced stage".