LONDON — European and U.S. stock markets fell Monday as uncertainty about the pace of the U.S. economic recovery weighed on sentiment at the start of a busy week that could go a long way to deciding whether the Federal Reserve opts to back further stimulus measures.
In Europe, Germany's DAX closed down 38.76 points, or 0.7 percent, at 5,912.41, while the CAC-40 in France fell 20.43 points, or 0.6 percent, to 3,487.01. British markets were closed for a public holiday.
In the U.S., the Dow Jones industrial average was down 54.65 points, or 0.5 percent, at 10,096 around midday New York time, while the broader Standard & Poor's 500 index fell 5.3 points, or 0.5 percent, to 1,059.29.
Fed chairman Ben Bernanke said last week that another round of monetary easing may be in the offing if the U.S. economy continues to weaken, so investors this week will be focused on a round of top-tier economic data, which culminate on Friday with non-farm payroll figures for August.
The payroll data often set the market tone for a week or two, and anything particularly weak will likely affect whether the Fed decides to introduce additional stimulus measures. At the moment, market consensus is that around 90,000 U.S. jobs were lost in August, but that 26,000 were added, if government census jobs that ended are taken out of the equation.
Before then, investors will have plenty of other key economic data to digest, not least the monthly manufacturing and services surveys from the Institute of Supply Management.
"Markets are bracing for a heavy economic calendar," said Michael Woolfolk, an analyst at Bank of New York Mellon.
Market sentiment was buoyed Friday after Bernanke indicated the central bank would back further stimulus measures, if the U.S. economy continues to weaken. Figures on the same day showed that the world's largest economy grew at an annualized rate of 1.6 percent in the second quarter of the year, down from the previous estimate of 2.4 percent.
The willingness of major central banks to take more action to prevent a slide back into recession has generally reassured equity market investors who have been unnerved over the past couple of months by evidence from the U.S. to China that the global economic recovery is losing momentum.
The Bank of Japan on Monday took action to help prop up an increasingly fragile economy, deciding at an emergency meeting to further ease monetary policy by expanding low-interest loans for financial institutions to 30 trillion yen ($355 billion) from 20 trillion yen.
That supported shares in Japan — more liquidity in the markets is generally good for stocks — and the Nikkei 225 stock average closed up 158.20 points, or 1.8 percent, to 9,149.26.
The Bank of Japan's latest moves did nothing to halt the export-sapping appreciation in the yen, as many currency traders viewed the measures as insufficient. By late afternoon London time, the dollar was down 0.8 percent at 84.67 yen.
"While it is encouraging that the BoJ seems to be moving in the right direction, the response from the central bank was underwhelming and came as a disappointment," said Eric Viloria, a currency strategist at GAINCapital.com.
Last week's decline in the dollar to a 15-year low of 83.61 yen proved to be the catalyst to the Bank of Japan's emergency meeting. The worry is that the rising yen will make it more difficult for Japan's high-value exporters to compete in international markets, further threatening country's paltry economic recovery.
While the U.S. and Japanese economic news has generally been disappointing over the past month or two, the eurozone economic data have been better than expected.
The European Commission's monthly economic sentiment survey Monday sustained hopes that the single currency zone was grappling with its debt crisis much better than the markets had feared earlier this year.
Its economic sentiment indicator rose 0.7 points to 101.8 in August, its highest level since March 2008, with confidence improving in almost all sectors.
Although the figures will likely cheer policymakers, the European Central Bank is not expected to change policy when it meets Thursday. It is expected to keep its main interest rate unchanged at 1 percent.
The better than expected data did little to boost the euro, which was trading 0.6 percent lower on the day at $1.2682.
Elsewhere in Asia, South Korea's Kospi rose 1.8 percent to 1,760.13 and the Shanghai Composite index added 1.6 percent to 2,652.66. Hong Kong's Hang Seng advanced 0.7 percent to 20,737.22. Australia's S&P/ASX 200 gained 1.9 percent to 4,452.70, as commodity stocks posted healthy gains.
Benchmark crude for October delivery was down 55 cents at $74.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $1.81 to settle at $75.17 per barrel on Friday.