European stocks dropped in early trade on Monday, with one benchmark index hitting a four-week low, as the lack of progress in resolving Washington's budget standoff kept investors on edge.
Around Europe, UK's FTSE 100 index was down 0.9%, Germany's DAX index down 1.2% and France's CAC 40 down 1.4%.
Treasury Secretary Jack Lew on Sunday told CNN that Congress "is playing with fire if they don't extend the debt limit," as the U.S. on Oct. 17 will run out of its ability to borrow.
Meanwhile, House Speaker John Boehner told ABC there aren't enough votes in the House of Representative to fund the government without defunding or delaying the Affordable Care Act.
Shares in luxury goods makers were among the heaviest fallers after Burberry's CEO was quoted in French daily Les Echos as saying that the slowdown in luxury goods sales in China may constitute a new market trend.
Burberry was down 2%, while France's LVMH was down 1.8%, and Swiss watch maker Richemont lost 1.5%.
Bucking the trend, shares in Banca Monte dei Paschi di Siena rose 4% after the Italian lender said it would hold a board meeting on Monday to approve a new restructuring plan aimed at gaining a green light from European authorities for a state bailout it was granted earlier this year.
In EMU data released showed the EMU’s Investor Confidence gauged by the Sentix index disappointed traders for the month of October, falling to 6.1 vs. 10.6 expected and 6.5 from the previous month. Separate report printed Eurozone GDP grew for the second consecutive month by 0.3% q/q in Q2, following a 0.3% rise registered the previous quarter.
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