EUROPE MARKETS: The European Selloff Is Back: German DAX Slides 1.5%

By Sara Sjolin and Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stock markets fell on Monday, as last Friday's huge rally, so far, has failed to carry over into this week's start.

The Stoxx Europe 600 index lost 0.5% to end at 317.01, 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 suffered another beating, closing down 1.5% at 8,717.76,

As officials at the European Central Bank continue to debate further stimulus measures, 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," said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.

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 Schlossberg.

As part of a previously outlined stimulus program, the ECB on Monday said it's started buying short-dated covered bonds from different countries, in sizes up to 25 million euros ($32 million).

Market action: Shares of SAP SE weighed on the German index, losing 5.8% after the software provider lowered its earnings outlook for this year.

Elsewhere in Europe, France's CAC 40 index fell 1% to 3,991.24, while the U.K.'s FTSE 100 index dropped 0.7%.

Shares of Royal Philips NV lost 3.7% 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 0.9% to 18,540.10.

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