By Sara Sjolin, MarketWatch

Alstom climbs after contract win

European stocks kicked off the week in negative territory, with rising expectations the U.S. Federal Reserve will raise interest rates later this year punching the air out of the recent rally.

The Stoxx Europe 600 index lost 0.6% to 341.80, pulling back after a 1.1% climb last week.

The pan-European benchmark settled 0.5% higher on Friday (http://www.marketwatch.com/story/european-stocks-edge-down-before-yellen-steps-onto-center-stage-2016-08-26), as Fed Chairwoman Janet Yellen at a closely watched speech at Jackson Hole, Wyo. said the U.S. economy is improving, seen as a sign of confidence in economic growth world-wide. The central bank boss also hinted a rate increase is on the cards in coming months, which weighed on U.S. markets on Friday and dragged stocks in most of Asia and Europe lower on Monday.

Read:Here's what the Fed's rate should be, using rule footnoted in Yellen speech (http://www.marketwatch.com/story/heres-what-the-feds-rate-should-be-using-rule-footnoted-in-yellen-speech-2016-08-26)

"The Fed is about to tighten the screw again on cheap money and one step closer to bringing the monetary policy to its normal path. This is not the kind of news that the equity traders are going to cheer and hence we are seeing this kind of reaction in the market," said Naeem Aslam, chief market analyst at ThinkMarkets, in a note.

"The most important data which is standing between the Fed and another rate hike is the upcoming U.S. [nonfarm payrolls] number due this week on Friday," he added.

The nonfarm payrolls data is one of the most highly anticipated monthly economic reports, as it reveals the health of the U.S. labor market and helps the Fed set its path for monetary policy.

The dollar strengthened against most major currencies after the Yellen's speech and continued its march higher on Monday. The euro slipped to $1.1183, down from $1.1197 late Friday in New York.

Movers: Shares of Alstom SA (ALO.FR) gained 2.3% after the French infrastructure company late Friday said it signed a EUR1.8 billion deal to design and build 28 new high-speed trains for U.S. rail operator Amtrak.

Roche Holding AG (ROG.EB) opened higher after the Swiss drugmaker said it had received an "emergency use authorization" from the U.S. Food and Drug Administration for its Zika test. Shares, however, erased gains and traded 0.2% lower in morning action.

Indexes: Germany's DAX 30 index slid 1.2% to 10,470.24, while France's CAC 40 index gave up 1.1% to 4,395.145.

U.K. markets were closed for a local bank holiday.

(END) Dow Jones Newswires

August 29, 2016 04:21 ET (08:21 GMT)