(MENAFN- AFP) Europe's main stock markets fell sharply on Monday as disappointing German business data overpowered broad relief after a comfortable majority of eurozone banks passed the ECB's draconian health test.
The German data, along with the re-election of Brazilian President Dilma Rousseff -- viewed as unfavourable to business -- also weighed down Wall Street, with the Dow opening down 0.29 percent.
London's benchmark FTSE 100 index slipped 0.58 percent to 6,351.46 while Frankfurt's DAX 30 dropped 1.38 percent to 8,863.72.
In Paris the CAC 40 lost 1.48 percent to 4,067.75 compared with Friday's closing value, while Madrid gave up 2.12 percent.
Milan shed 2.74 percent, with the shares of some Italian banks which failed the European Central Bank's stress tests hard hit.
But analysts said that overall there were few surprises, and there was some profit taking. The Stoxx index of European banks was down 1.70 percent in afternoon trading.
The euro firmed against other major currencies after the ECB gave a large majority of eurozone banks a clean bill of health on Sunday, fuelling hopes that a major cause of economic uncertainty could soon be eliminated.
In the most stringent audit of eurozone banks ever undertaken -- aimed at preventing a repetition of the crisis that nearly led to the euro's collapse -- the ECB found that 25 of a total 130 eurozone banks were short of financial resources by a combined 25 billion euros ($31 billion) at the end of 2013.
Nine of them were Italian, including Banca Monte dei Paschi di Siena (BMPS), the third-biggest Italian bank, which plunged 17.55 percent, and Banca Carige, which dropped 15.68 percent.
"Italy appears to be the bad pupil, while the French banks appear especially solid," said an analysis by Credit Mutuel-CIC.
Greek banks suffered too, after strong initial gains, with the index of banking shares dropping 2.76 percent to 1.37.72 and the general equity market Athex dipping 2.18 percent at 1213 GMT.
Overall, the ECB test results "painted a much healthier than expected picture of the European banking sector," said Mark Hubur of Peregrine & Black.
In Germany, where one bank failed, bank shares were firm, while shares in leading French banks, which passed the tests, fell on profit-taking, dealers said.
- British bank shares slip -
Michael Hewson, chief market analyst at traders CMC Markets UK, warned however that in the long run, the banks' performance on the stress tests "is less important than the fact that loan demand remains non-existent."
He added: "That is likely to remain a problem, given concerns about the long term economic outlook in Europe."
Loans to the private sector in the euro area, a gauge of economic health, fell year-on-year in September, but by slightly less than in August, the ECB said on Monday.
Separate data showed Germany's business confidence fell to the lowest level for nearly two years in October, as the outlook for Europe's biggest economy continues to cloud over.
The Ifo economic institute's closely watched business climate index fell to 103.2 points in October from 104.7 points in September, the think-tank said in a statement.
That is the lowest level since December 2012.
British banks, despite passing their tests as part of a wider EU assessment, were also trading lower.
State-rescued lenders Lloyds Banking Group and Royal Bank of Scotland dropped 1.88 percent and 1.43 percent to 75.28 pence and 359 pence respectively.
Barclays lost 1.04 percent and HSBC retreated 0.91 percent.
Wall Street stocks opened lower following the disappointing German economic data as the market looked ahead to a two-day Federal Reserve monetary policy meeting that opens Tuesday.
Five minutes into trading, the Dow Jones Industrial Average stood at 16,757.31, down 48.10 points (0.29 percent).
The broad-based S&P 500 dropped 7.17 (0.36 percent) to 1,957.41, while the tech-rich Nasdaq Composite Index declined 14.41 (0.32 percent) to 4,469.31.
In foreign exchange deals, the euro climbed to $1.2680 at around 1400 GMT from $1.2666 late in New York on Friday.
The European single currency edged up to 78.74 British pence from 78.73 pence. The British pound advanced to $1.6108 from $1.6086 on Friday.
It slipped slightly against the yen, to 136.74 yen against 136.97 on Friday, as did the greenback, to 107.84 from 108.14.
The ruble fell to record levels against the dollar and the euro.
On the London Bullion Market, the price of gold fell to $1,230.84 an ounce from $1,235.75.
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