By Sara Sjolin, MarketWatch

LONDON (MarketWatch) — European stock markets dropped on Monday, tracking losses seen overnight in Asia and last week in the U.S., where worries over rising Treasury yields and jitters over monetary policy spooked investors.

The Stoxx Europe 600 index XX:SXXP -0.44% gave up 0.4% to 305.17, erasing a 0.3% gain from Friday.

Banks posted some of the biggest losses in the pan-European index, with UniCredit SpA IT:UCG -3.93% off 1.5%, Deutsche Bank AG DE:DBK -1.05% DB +0.89% down 1% and Banco Santander SA ES:SAN -2.10% SAN +2.23% 0.9% lower.

Shares of Glencore Xstrata PLC UK:GLEN -2.30% erased 1.7% after reports said the resource giant is expected to write down the value of assets from recently acquired Xstrata. A representative from the firm declined to comment. Glencore Xstrata reports first-half earnings on Tuesday.

On a more upbeat note, shares of Atlas Copco AB SE:ATCOA +3.66% climbed 2.1% on news the Swedish engineering group will buy Edwards Group Ltd. EVAC +1.20% for $10.50 a share in cash, valuing the transaction at around $1.6 billion, including debt.

More broadly, investors were cautious of placing any big positions amid uncertainty over the U.S.’s monetary-easing program. Federal Reserve Chairman Ben Bernanke has said any tapering of the bank’s $85-billion-a-month asset purchases will only happen if data improve, and recent jobless claims and an improvement in core retail sales have added to speculation it could happen as soon as September.

Reuters Enlarge Image
European stocks drop on Monday amid concerns the U.S. Federal Reserve will taper its easing program.
The concerns pushed the yield on the 10-year U.S. Treasury to hit the highest level in two years on Friday. In return, the Dow Jones Industrial Average DJIA -0.20% suffered its biggest weekly percentage drop and point loss of 2013.

The negative mood also spilled over into the new trading week in Asia, where most markets closed lower.

On Wednesday, minutes from the Fed’s latest policy-setting meeting will be released, which could provide more information about the central bankers’ view on the tapering process.

Among country-specific indexes in Europe, the U.K.’s FTSE 100 index UK:UKX -0.39% dropped 0.3% to 6,481.84, while France’s CAC 40 index FR:PX1 -0.73% lost 0.7% to 4,093.81. Germany’s DAX 30 index DX:DAX -0.31% shaved off 0.7% to 8,331.95.

Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.