German stocks gain on business confidence

Better-than-expected business confidence in Germany helped Frankfurt buck a sliding trend across most European stock markets on Monday, as investors booked gains made last week and waited for clues on US monetary policy.

London's benchmark FTSE 100 index of leading blue-chip companies shed 0.42 percent to 6,417.02 points.

In the eurozone, the Paris CAC 40 gave up 0.54 percent compared with Friday's close to 4,897.13 points.

On the upside, Frankfurt's DAX 30 managed a gain of 0.06 percent to 10,801.34 after a top survey showed that German business confidence dropped less than expected during October.

Before the weekend, the region's markets had rallied on expectations of further economic stimulus for the eurozone, and after China slashed interest rates to counter the slowdown in the world's second-biggest economy.

"A third day of gains was always going to be tough without much on the calendar and following a week that saw European shares rise 5 percent," said Jasper Lawler, market analyst at CMC Markets UK.

But a smaller than expected dip in German business confidence bolstered sentiment on the country?s benchmark stock index as "exporters listed on the DAX stand to benefit the most from a combination of a lower European exchange rate and higher demand that could result from China?s rate cut.

German business confidence dipped only slightly in October, as Europe's biggest economy continues to shrug off various challenges, including the Volkswagen scandal, the leading economic think tank Ifo said Monday.

The Ifo institute's closely-watched business climate index slipped to 108.2 points in October from 108.5 points in September, Ifo said in a statement, a much shallower drop than analysts had expected.

- Waiting for the Fed -

US stocks were also in a holding pattern ahead of major earnings reports and a Federal Reserve policy meeting later this week.

In midday trading the Dow Jones Industrial Average had nudged down 0.04 percent to 17,638.78 points.

Meanwhile, the broad-based S&P 500 slid 0.24 percent to 2,070.23, while the tech-rich Nasdaq Composite Index added 0.08 percent at 5,035.83.

At its meeting on Tuesday and Wednesday the Fed is expected to again put off raising interest rates, but it could make clearer how soon a rate hike could come.

"This is the Fed's last chance to convince the markets that a rate hike is coming this year, therefore December, assuming of course that it still intends to do so," said Craig Erlam, senior market analyst at currency trading outfit Oanda.

Fed Chair Janet Yellen has repeatedly said this year that an increase in the interest rate, near zero since 2008, is likely by year-end. She repeated the prediction on September 24, while as usual stressing that the move would be "data-dependent".

But since Yellen last spoke US economic data has come in weaker than expected, especially the numbers on the September jobs market released on October 2.

The Fed funds rate level has a huge impact on global interest rates and speculation on an increase has spurred months of greater volatility in markets worldwide.

Elsewhere, Asian stock markets on Monday welcomed China's latest cut in interest rates, but analysts warned the move indicates further weakness in the world's number two economy.

While Friday's move -- the sixth reduction since November -- realised hopes for further monetary easing, Premier Li Keqiang tempered the mood by indicating China's economy could grow less than seven percent this year.

On Friday the People's Bank of China cut interest rates by 0.25 percentage points and lowered the reserve ratio requirement -- the amount of cash banks must keep in reserve.

Asian equities powered higher in early trade Monday but the gains were tempered later on, with Hong Kong and Sydney retreating.

Shanghai ended 0.50 percent higher but Hong Kong finished 0.15 percent down.

Tokyo closed up 0.65 percent, having been more than one percent higher at one point, while Seoul closed 0.38 percent stronger.

Sydney, where several firms with close business ties to China are listed, eased 0.07 percent.

In foreign exchange activity on Monday, the European single currency climbed to $1.1054 from $1.1016 late on Friday in New York.