By Sruthi Shankar, Shristi Achar A and Siddarth S
(Reuters) -European stocks kicked off the final quarter on a negative note as higher bond yields pressured equities and as data showed factory activity in the euro zone remained in a broad-based downturn.
The pan-European STOXX 600 index reversed early gains to fall 1.0% on Monday, hitting its lowest intra-day low in since end of March.
The euro zone's benchmark German 10-year government bond yield rose to 2.922%, towards the 12-year high hit last week.
"(The fall in STOXX) is just so closely linked with what we're seeing in bond markets at this point. We're still seeing yields rising and that's probably unsettling some investors," said Craig Erlam, Senior Market Analyst, OANDA.
Euro zone manufacturing activity remained mired in a deep and broad-based downturn in September, according to a survey which showed demand shrank at a pace rarely surpassed since the data was first collected in 1997.
HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, dipped to 43.4 in September from August's 43.5, matching a preliminary estimate.
All European indexes traded in the red, with Germany's DAX index down 0.9%.
Voucher and card provider Edenred (EPA:EDEN) plunged 11% to the bottom of STOXX 600, after a French minister's comments on a possible commissions cap on meal vouchers in France.
Shares of peer Sodexo (EPA:EXHO) also lost 3.3%.
The benchmark STOXX 600 marked its first quarterly decline of the year on Friday, dented by concerns about a sputtering Chinese economy and interest rates staying elevated for longer.
Among other stocks, debt-burdened Casino slid 7.5% after the French retailer said it had completed the sale of a first set of 61 stores in France to Groupement Les Mousquetaires and extended its purchasing alliance to include private-label food products.
BAE Systems (LON:BAES) added 1.1% after Britain awarded the defence company a 4 billion pound ($4.89 billion) contract as part of the AUKUS programme with Australia and the U.S. to build attack submarines.
Swiss-listed sensor maker Ams Osram jumped 3.8% after Jefferies said that demand trends will "progressively improve" over the next two years, even as it cut its price target on the stock.