* FTSEurofirst 300 falls 0.7 percent
* FTSE MIB is biggest loser as Italian government teeters
* Investors also nervous over U.S. budget impasse
* European stocks still set for best quarter since 2011
By Alistair Smout
LONDON, Sept 30 European shares fell on Monday,
led lower by Italian shares after cabinet resignations in Rome
risked triggering new elections while fiscal stalemate in the
United States further soured the investor mood.
The pan-European FTSEurofirst 300 was down 0.7
percent at 1,245.59 at 1038 GMT, with every major country index
in negative territory and tracking global equity markets spooked
by deadlock in the U.S. Congress as its budget deadline neared.
The Italian blue-chip FTSE MIB fell 1.9 percent,
the biggest percentage faller among major European bourses and
suffering its worst session for six weeks after former premier
Silvio Berlusconi's party withdrew its ministers from cabinet.
Despite those concerns, European shares remained near
five-year highs and looked set for their best quarter in two
"The move by Mr Berlusconi's associates over the weekend
definitely hasn't helped sentiment, and while we're seeing all
stock markets down, it's the Italians that have been hit the
hardest," David Jones, chief market strategist at IG, said.
"Saying all of that, it's only a week or so ago that it made
highs for the year, so it's not as bad as two or three years ago
when we were really in the middle of crisis."
Italian stocks accounted for Europe's biggest movers. Lender
Intesa Sanpaolo fell 4.3 percent, the top FTSEurofirst
300 faller, with traders citing the appointment of new
CEO Carlo Messia as negative for the stock, potentially
signalling more risky merger activity.
Telecom Italia was one of four top Italian stocks
to rise, gaining 3.3 percent to top the Eurofirst leader board
after reports that its CEO was set to resign on Thursday,
allaying concerns over a possible capital increase, with the
stock also benefiting from a JP Morgan upgrade.
Chances that U.S. Republicans and Democrats could reach a
deal on funding the government for the new fiscal year before
midnight on Monday seemed slim. On Sunday, the
Republican-controlled House of Representatives passed a measure
tying government funding to a delay of a healthcare
restructuring law, which Senate Democrats have vowed to reject.
Jitters over the political situation have taken the wind out
of a recent equity rally after the U.S. Federal Reserve
maintained its stimulus at the current pace, and EPFR fund flow
data showed that Germany equity funds recorded their biggest
weekly outflow since the second quarter of 2012.
But the FTSEurofirst remains near five-year highs, and is
trading up 4 percent for September and up 8 percent since June,
leaving it set for its best quarter since 2011.
"We believe that there is a strong fundamental case for
European equities, driven by improving economic growth, high
operational gearing and reasonable valuation," analysts at
Goldman Sachs said in a note.