Stock prices on European markets were dragged lower Monday by an expected retreat on Wall Street, at the start of a major week on the economic news front that may go a long way to determining investors' views about the world economy going into the last quarter of the year.
In Europe, the FTSE 100 index of leading British shares was down 26.26 points, or 0.5 percent, to 5,566.64 while Germany's DAX fell 62.27 points, or 1 percent, to 6,149.07. The CAC-40 in France was 38.65 points, or 1.1 percent, lower at 3,653.24.
Wall Street was poised for a fairly hefty retreat at the open later — Dow futures were down 42 points, or 0.4 percent, at 10,726 while the broader Standard & Poor's 500 futures fell 5.8 points, or 0.5 percent, to 1,136.50. With less than half an hour in the trading day, the Dow is down 96 points, or 0.89 percent.
Even though stocks enjoyed one of their best Septembers in years — the S&P 500 index added nearly 9 percent during the month alone, its best September performance since 1939 — sentiment remains fragile ahead of key economic data and a raft of central bank policy statements.
The key release this week comes on Friday with the monthly U.S. nonfarm payrolls report for September. The jobs data often set the market tone for a week or two after their release and investors will be closely monitoring the September data to see if the pace of job creation in the private sector is picking up, as some recent indicators have suggested.
The data could have a bearing on whether the Federal Reserve takes further action to stimulate the U.S. economy — a move likely to lower long-term interest rates.
Many economists predict the Fed will move to buy more government securities — perhaps as soon as its next meeting on Nov. 2-3. The Fed is weighing that option, known as quantitative easing, because its traditional interest-rate lever to help the economy is already at a record low near zero and can't be cut further.
Before then, there is a mass of news that could impact markets, not least interest rate meetings from the European Central Bank, the Bank of England, the Bank of Japan and the Reserve Bank of Australia.
And other economic data, such as eurozone retail sales figures for August, German industrial data and a U.S. services sector survey from the Institute for Supply Management will provide insights into the state of the global economic recovery.
"Pending home sales and factory orders data is due out of the U.S. today, which should bring in some volatility but we could see the cautious tone continue for this week ahead of Friday's nonfarm payrolls release," said Ben Critchley, sales trader at IG Index.
As if the economic news weren't enough, investors will also have to contend with the start of the third-quarter U.S. corporate earnings reporting season. As usual, aluminum company Alcoa Inc. kicks off earnings season on Thursday.
All this will likely lead to volatility in the currency markets, which have been in the spotlight over the past couple of weeks since the Bank of Japan intervened directly to stem the export-sapping appreciation of the yen — the intervention has not helped reverse the yen's path though it may have put a ceiling on its ascent.
The continued relative strength of the yen hurt Japanese stocks earlier and the Nikkei 225 stock average closed down 23.17 points, or 0.3 percent, to 9,381.06.
Elsewhere in Asia, most markets rose. Hong Kong's Hang Seng index jumped 1.2 percent to 22,618.66, with particular strength seen in the property sector. South Korea's Kospi rose 0.1 percent to 1,879.29 and Australia's S&P/ASX 200 added 1 percent to 4,625.30. Financial markets in mainland China are closed through Oct. 7 for the National Day holidays.
As in the stock markets, Friday's U.S. jobs report is potentially the most important likely driver.
"Continued deterioration in U.S. economic data would reinforce the already negative sentiment surrounding the dollar, and this Friday's U.S. employment and payrolls report for September, should offer clues as to whether or not the U.S. economy is starting to turn around," said Michael Hewson, market analyst at CMC Markets.
By early afternoon London time, the euro was down 0.5 percent on the day at $1.3717 as it drifted back from six and a half month highs of $1.3793. Meanwhile the dollar was flat at 83.22 yen.
Benchmark oil for November delivery was down 57 cents to $81.01 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.61 to settle at $81.58 on Friday, the first time it topped $80 a barrel since early August.