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London / AFP
Stock markets swung mostly lower on Monday, with attention fixed on central bank policy before an ECB meeting this week and speculation on the outlook for US borrowing costs.
Asian markets diverged following healthy gains for world equities at the end of last week, as investors bet that the Federal Reserve would raise interest rates before the end of the year.
Meanwhile European Central Bank chief Mario Draghi will be under pressure this week to clarify the bank’s stimulus plans after investors were spooked by talk of an end to its massive bond-buying programme.
Eurozone official data released on Monday showed inflation across the bloc rising to 0.4 percent in September year-on-year, unchanged from a prior estimate.
Around 1100 GMT, London’s benchmark FTSE 100 index was down 0.8 percent compared with the close on Friday.
In the eurozone, Frankfurt’s DAX 30 and Paris CAC 40 each lost 0.5 percent.
The pound remained under pressure amid reports of divisions between British finance minister Philip Hammond and other cabinet members over how the country proceeds on its exit from the EU, with some suggesting he may resign.
“Hammond is thought to prefer a plan in which migration curbs are delayed and Britain would pay into the EU budget for single market access,” noted Jasper Lawler, analyst at trading group CMC Markets.
“It’s a stance that would be welcomed by markets,” he added.
The Treasury had yet to comment on the reports.
World stocks had jumped on Friday on data showing the first rise in Chinese factory prices for more than four years, fuelling hopes the world’s number two economy is reaching the end of a years-long growth slowdown.
“Markets have started the week on a softer note with stocks lower, (bond) yields streaking higher and havens including gold and the Japanese yen in demand,” Lawler added.
Markets continue to focus heavily on the Fed, whose boss Janet Yellen on Friday suggested the US central bank would raise borrowing costs but at a steady pace.
Yellen said running a “high-pressure economy” could help it overcome the damage caused by the global financial crisis.
“If nothing else, this is another lower-for-longer prescription,” said Thomas Simons, senior economist at Jefferies LLC.
“However, these comments do not preclude a 25-basis-point rate hike this year as another step in the normalisation process,” he wrote in a note to clients.
Most experts predict a rise by December at the latest and are closely watching the release this week of US industrial output and inflation data.