Equities retreat with US rates back in focus

Asian and European stock markets mostly fell Monday and the dollar rose as relief over a last-minute deal to avoid a US government shutdown gave way to renewed concerns over high interest rates.

The US Congress approved a stopgap funding bill Saturday in a rare show of cross-party unity to keep federal agencies running for another 45 days and avert damaging government paralysis.

Investor attention was turning back to US rates outlook on the first trading day of the fourth quarter, with all eyes on a key speech due from Federal Reserve boss Jerome Powell.

"As the new month kicks off, investors appear to be in a brighter mood," said Russ Mould, investment director at brokerage AJ Bell.

"It's been a testing time for markets as investors weigh up the likelihood of sticky inflation and interest rates remaining higher for longer."

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US stocks ended Friday mostly lower as a government shutdown appeared likely after hardline Republicans had tanked an earlier plan to keep the lights on.

In Europe on Monday, Frankfurt, London and Paris stocks all drifted lower approaching the half-way stage.

In Asia, Tokyo closed slightly down, giving up early gains spurred by a positive Bank of Japan business confidence survey as sentiment reverted to risk-off.

The Tankan survey showed increasing optimism among Japan's largest manufacturers for a second-straight quarter but that rosy glow soon faded as US rate fears returned.

Asian markets were somewhat subdued with Hong Kong, South Korea and India closed for holidays.

Markets in mainland China were closed for a week-long holiday.

Among those trading, Singapore, Sydney, Wellington, Kuala Lumpur and Manila were in the red while Taipei, Jakarta and Bangkok saw gains.

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On foreign exchange markets, the yen was weakening towards the psychological 150 to the dollar level.

The yen's weakness is fuelling speculation that the government may step in to prop up the currency, which has been hammered by the Bank of Japan's refusal to move away from its ultra-loose monetary policy even as the Fed considers lifting interest rates further.

Oil rebounded on bargain-hunting on Monday, after last week's sharp losses which were sparked by fears over supplies from key producers Saudi Arabia and Russia.

Key figures around 1100 GMT

London - FTSE 100: DOWN 0.4 percent at 7,574.99 points

Frankfurt - DAX: DOWN 0.2 percent at 15,354.71

Paris - CAC 40: DOWN 0.3 percent at 7,112.23

EURO STOXX 50: DOWN 0.3 percent at 4,161.91

Tokyo - Nikkei 225: DOWN 0.3 percent at 31,759.88 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

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New York - Dow: DOWN 0.5 percent at 33,507.50 points (close)

Euro/dollar: DOWN at $1.0539 from $1.0573 Friday

Pound/dollar: DOWN at $1.2161 from $1.2199

Euro/pound: DOWN at 86.65 pence from 86.66 pence

Dollar/yen: UP at 149.76 yen from 149.37 yen

Brent North Sea crude: UP 0.9 percent at $93.05 per barrel

West Texas Intermediate: UP 0.9 percent at $91.60 per barrel

Source: AFP