Stocks stuck as markets eye central banks

Stock markets stagnated Monday, with attention fixed on central bank policy before an ECB meeting this week and speculation on the outlook for US borrowing costs.

"Central bank uncertainty is festering as the markets grapple with elevated Fed rate hike expectations and as the European Central Bank is slated to deliver its monetary policy decision on Thursday," said analysts at Charles Schwab as Wall Street opened flat then drifted downwards.

World equities posted healthy gains at the end of last week as investors bet that the Federal Reserve would raise interest rates before the end of the year.

ECB 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 Monday showed inflation across the bloc rising to 0.4 percent in September year-on-year, unchanged from a prior estimate.

Europe's main equities markets ended the day on the back foot, with Paris down 0.5 percent and Frankfurt 0.7 percent.

London's FTSE 100 index fell 0.9 percent and the pound remained under pressure amid reports of divisions between British finance minister Philip Hammond and other cabinet members over how the country should proceed with its exit from the EU, with some suggesting he may resign.

"Reports of divisions between Chancellor Philip Hammond and the rest of Theresa May's cabinet over Brexit have caused investors to sell UK assets across the board," said Jasper Lawler, analyst at trading group CMC Markets.

"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. It's a stance that would be welcomed by markets", he added.

-'Lower for longer' -

May's spokeswoman sought to play down any rift, telling reporters: "The prime minister has full confidence in the chancellor and the work that he is doing."

Markets also continue to focus heavily on the Fed, whose boss Janet Yellen suggested on Friday 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.

The prospect of higher borrowing costs weighed on Asian markets in the morning but some staged a recovery as the day wore on.

Tokyo ended 0.3 percent higher, with a pick-up in the dollar against the yen in Asian trading helping exporters.

- Key figures around 1530 GMT -

London - FTSE 100: DOWN 0.9 percent at 6,947.55 points (close)

Frankfurt - DAX 30: DOWN 0.7 percent at 10,503.57 (close)

Paris - CAC 40: DOWN 0.5 percent at 4,450.23 (close)

EURO STOXX 50: DOWN 0.4 percent at 3,012.15

New York - DOW: DOWN 0.2 percent at 18,104.62

New York - S&P 500: DOWN 0.1 percent at 2,131.09

New York - Nasdaq: DOWN 0.1 percent at 5,208.06

Tokyo - Nikkei 225: UP 0.3 percent at 16,900.12 (close)

Hong Kong - Hang Seng: DOWN 0.8 percent at 23,037.54 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,041.17 (close)

Euro/dollar: UP at $1.0995 from $1.0974 Friday

Dollar/yen: DOWN at 103.96 yen from 104.16 yen

Pound/dollar: DOWN at $1.2189 from $1.2193

Euro/pound: UP at 90.22 pence from 90.01 pence

Oil - West Texas Intermediate: DOWN 76 cents at $49.59 a barrel

Oil - Brent North Sea: DOWN 73 cents at $51.22 a barrel