Volkswacht Bodensee - Stocks diverge at start of key week for rate calls

The US Federal Reserve updates its policy on borrowing costs Wednesday followed by interest-rate decisions from the European Central Bank and Bank of England on Thursday.

With all three expected to hold borrowing costs after hiking multiple times to combat high inflation, traders will be looking for clues in the banks' statements on when rate-cutting would likely start as the pace of price rises cool.

In equities trading Monday, Tokyo closed higher as the yen tumbled against the dollar, boosting exporters.

Paris edged higher, not far from its record-high in April, while London weakened.

The yen shed one percent versus the dollar on waning expectations that the Bank of Japan would tighten its ultra-loose monetary policy next week.

While many central banks have significantly hiked interest rates over the past couple of years to tame soaring prices, the BoJ has refused to shift from its long-term programme of sub-zero rates to kickstart the world's number three economy.

All eyes this week will be on clues regarding the outlook for borrowing costs in the US and Europe.

"Central bank meetings of the Federal Reserve, European Central Bank and the Bank of England are likely to be crucial in managing expectations when it comes to the timing and pace of when markets can expect to see rate cuts begin," noted Michael Hewson, chief market analyst at CMC Markets UK.

A forecast-beating US jobs report last Friday -- and a pick-up in consumer sentiment -- tempered expectations for Fed interest-rate cuts in the new year but were not enough to jolt confidence that decision-makers have finished with their tightening cycle.

US readings on consumer prices and retail sales are due this week, as is the Fed's meeting and boss Jerome Powell's statement, which will be parsed for indications of officials' plans.

All three main indices on Wall Street rose Friday but Asian traders struggled to extend a broad rally Monday, with sentiment jarred by figures showing China slipped further into deflation last month as leaders struggled to kickstart the stuttering economy.

Consumer prices fell at their steepest pace in three years, data showed, fuelling fresh calls for the government to unveil more economic support measures.

"China's deflation situation is deepening with the triple whammy from domestic food prices, international oil price corrections and weak domestic demand," said economists at Citigroup.

"There is no time for policy hesitation to prevent a vicious loop between deflation, confidence and activities."

- Key figures around 1115 GMT -

London - FTSE 100: DOWN 0.7 percent at 7,500.10 points

Paris - CAC 40: UP 0.1 percent at 7,532.81

Frankfurt - DAX: DOWN 0.1 percent at 16,745.30

EURO STOXX 50: FLAT at 4,524.40

Tokyo - Nikkei 225: UP 1.5 percent at 32,791.80 (close)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 16,201.49 (close)

Shanghai - Composite: UP 0.7 percent at 2,991.44 (close)

New York - Dow: UP 0.4 percent at 36,247.87 (close)

Dollar/yen: UP at 146.25 yen from 144.97 yen on Friday

Euro/dollar: UP at $1.0769 from $1.0767

Pound/dollar: UP at $1.2576 from $1.2550

Euro/pound: DOWN at 85.63 pence from 85.76 pence

West Texas Intermediate: DOWN 1.1 percent at $70.46 per barrel

Brent North Sea crude: DOWN 0.9 percent at $75.13 per barrel

P.Keller--VB