Stocks rally cut off by EU threats over Italy\'s budget

After gains in Asia, hopes that European stocks would open higher were quickly dashed Italian shares fell more than half a percent, unwinding early gains in both the pan-regional STOXX 600 and Germany's DAX Italy's dispute with the European Commission dominated trading It could fine Italy 3 billion euros for accumulating debt and deficits that break EU rules.

Italian bond yields rose sharply for a second day and the country's banks fell more than 2% to near four-month lows.

London markets though were lifted by gains in mining shares.

The FTSE 100 reopening after a long weekend, inched 0.1% higher with BHP and Rio Tinto up 1 and 3% respectively as Chinese iron ore prices rose.

The exporter-heavy index also benefited from a weak pound as traders worried that the risk of a no-deal Brexit had grown It comes after a stunning defeat for the governing Conservative Party in last week's European elections.

Carmakers also provided a bright spot with traders citing a report that China's Guangdong province had launched stimulus measures to boost car sales.

Shares in Fiat-Chrysler and Renault though, who confirmed at the weekend they were in talks about a merger that would create the world's third biggest automaker both turned negative after some initial gains.

Positive data from the euro zone might boost morale though Economic sentiment was better than expected in May, rebounding after 10 consecutive monthly falls It's partly thanks to more optimism in the biggest sector, services.