European shares pause for breath; Carillion rivals gain

By Kit Rees

LONDON (Reuters) - European stocks edged lower on Monday following two weeks of gains, with cyclical stocks among the biggest decliners while merger activity remained in focus.

Shares in some competitors of Carillion <CLLN.L> rose after the long-struggling construction and support services company collapsed, with banks refusing to lend it any more money.

Serco <SRP.L> jumped 7.3 percent, Interserve <IRV.L> 2 percent and Kier Group <KIE.L> 3.5 percent, while Balfour Beatty <BALF.L> fell 3.3 percent.

While the STOXX index has seen a strong start to 2018 and has held at its highest levels since August 2015, weakness among banking and energy stocks kept the index in negative territory, while a stronger euro added pressure.

"European equities have been on a tear since the beginning of 2018, and we were due some form of a pullback," Jonathan Roy, market strategist at Ocean Capital Group, said.

"What we're going to have to see now are economic figures coming through as strong as they have been."

The pan-European STOXX 600 <.STOXX> index ended down 0.2 percent, while Euro zone blue chips <.STOXX50E> ended little changed. Cyclical stocks, whose profits are most sensitive to the strength of the economy, have been the best equity sector performers this year.

Finnish mining equipment maker Metso <METSO.HE> was the biggest faller on the STOXX, dropping 9.8 percent after its fourth-quarter earnings missed expectations.

German retailer Metro <B4B.DE> fell 3.8 percent after a sales update, with its Russian business showing a slowdown in sales in the Christmas quarter.

"Russia is likely to be the catalyst for any share price re-rating, and there is no sign of any progress yet on this front," analysts at Raymond James said in a note.

GKN <GKN.L> rose 4.1 percent after suitor Melrose <MRON.L> said it planned to meet shareholders of the British automotive and aerospace equipment maker following a rejected takeover offer.

Shares in Azimut Holding <AZMT.MI> were the top risers, up 12.7 percent after the Italian asset manager said it would double its dividend as it reported record net inflows.

(editing by John Stonestreet)