EUROPE MARKETS: The European Selloff Is Back: Germany's DAX Slides 1.6%

By Sara Sjolin and Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stock markets moved sharply lower on Monday, as the late-week rally from Friday ran out of steam.

The Stoxx Europe 600 index dropped 1% to 315.66, after ringing up a 2.8% rally on Friday. The Friday rally came after a wider selloff in European markets throughout the week, where the pan-European index logged its longest losing streak in more than a decade.

German stocks were among the hardest hit indexes in last week's market rout, dropping to the lowest level in a year. On Monday, the DAX 30 index looked to be suffering another beating, down 1.5% to 8,715.42.

Shares of SAP SE weighed on the German index, down 4.2% after the software provider lowered its earnings outlook for this year.

Elsewhere in Europe, France's CAC 40 index fell 1.3% to 3,980.82, while the U.K.'s FTSE 100 index dropped 1%.

Also among standout movers on Monday, shares of Royal Philips NV slid 4.1% as the Dutch tech company swung to a quarterly net loss because of a production suspension at one of its health care plants and a legal provision of 366 million euros ($467 million). (Read more about European stock movers http://www.marketwatch.com/story/sap-slides-nutreco-surges-europes-big-stock-movers-2014-10-20.).

Italy's FTSE MIB had been higher earlier after data showed Italian industrial orders rose in August, the first increase in four months. But the index succumbed to selling pressure and fell 0.5% to 18,602.46.

Purchasing managers indexes in Europe will be released on Thursday, "and markets will be keen to see some signs of stabilization in demand which has been trending lower for the past quarter," said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.

The eurozone economy "continues to be the main drag on global growth and until it shows some signs of life, risk-aversion flows are likely to continue to roil markets into the year end," he said.

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