UPDATE 1-Spain's political uncertainty, weak Eurozone data drags European shares lower

European shares fell on Monday as Spanish markets took a hit on uncertainty related to a government formation post, the country's general election and weak Eurozone economic sentiment that exacerbated fears over slowing global growth.

The pan-European STOXX 600 index fell 0.3 percent with most regional indices in the red led by Spain's IBEX which dropped 0.9 percent. Socialists led by Spanish Prime Minister Pedro Sanchez on Sunday won the country's third election in four years but were short of a majority for which they will need the help of regional parties, or the centre-right, to form a coalition government.

"Over the coming days and weeks the markets will be looking for progress in coalition talks," said Rabobank analysts in a note. Leading losses among sectors were utilities, which is also the worst performing sector in Europe.

Also weighing on sentiment was Eurozone economic sentiment which dipped for the 10th consecutive month to its lowest level in more than two years in April as managers in industry and the retail sector became more downbeat. The survey adds to evidence that economic prospects of the 19-member eurozone for the start of 2019 are muted.

Bayer was in focus after a majority of shareholders rejected the top management's actions on Friday, fuelling market talk the company could become a takeover target. Shares in Bayer, which were also trading ex-dividend, were down 2.4 percent. Excluding the impact of ex-dividend, however, the stock was up.

Covestro slipped after the German chemicals maker's profit more than halved in the first quarter with product prices under pressure as rivals bolster their output. SAS fell 2 percent after the Scandinavian airline cancelled more than 1,200 flights scheduled for Monday and Tuesday as a pilot strike continued.

Oil stocks were among the big laggards, tracking falling crude prices after President Donald Trump demanded that producer club OPEC raise output to soften the impact of U.S. sanctions against Iran. Helping temper those losses were Italian banks which rose as Italian government bonds rallied after S&P affirmed the country's sovereign ratings.

"Italy has been a concern for the eurozone for the last year...there is a tempering factor of what I guess is seen as a market-unfriendly election result in Spain," said Connor Campbell, an analyst at Spreadex. Also boosting the banking sector was Spain's state-owned lender Bankia which climbed 2 percent after the company's net profit for the first quarter came in slightly ahead of expectations.

SMCP rose 4 percent after the French fashion group reported a rise in first-quarter revenues on Monday and kept its guidance for higher annual sales growth and stable profit margins. An upgrade from SEB to "buy" put Dometic shares to the top of the STOXX 600 index, while Travel groups TUI and Thomas Cook rose over 2 percent after the latter said British holidaymakers are favouring destinations outside the European Union.

Market participants will watch out for a meeting of the U.S. Federal Reserve and Chinese factory data this week for further clues on policy direction in the world's largest economies.