European markets firm ahead of busy week

European stock markets have firmed as investors weighed the chances of more stimulus measures from the US Federal Reserve, and ahead of another busy week for the eurozone's debt crisis.

London's FTSE 100 index of top companies on Monday added just 0.04 per cent to 5796.97 points in late morning trade, Frankfurt's DAX 30 index gained 0.15 per cent to 7225.21 points and in Paris the CAC 40 rose 0.03 per cent to 3520.16.

In foreign exchange activity, the European single currency dipped to $1.2785 on profit-taking following an impressive pre-weekend rally.

The euro had surged to $US1.2817 on Friday, hitting the highest level since May 22, after weaker-than-expected non-farm payrolls data in the United States.

Global equities and the euro also rebounded last week after European Central Bank (ECB) chief Mario Draghi announced it could buy unlimited amounts of debt from troubled nations like Spain and Italy in a bid to lower borrowing costs.

"We are seeing a quieter start to trade in London - which is perhaps not too surprising following the fireworks at the end of last week," added IG Index analyst David Jones.

He added: "There does still seem to be an air of optimism around, particularly regarding Europe.

"It seems the chances of lurching into another sovereign debt crisis have been greatly reduced by Mario Draghi's proposal - and even disappointing Chinese export data hasn't dented the positivity."

Investors' focus now switches to Germany's Constitutional Court, which on Wednesday is due to decide whether German President Joachim Gauck can sign into law the eurozone's key crisis-fighting tools that include the European Stability Mechanism.

Other key events that will dictate investor sentiment include the US Federal Reserve's interest rate decision on Thursday and the Dutch general election on Wednesday.

"European markets kick off the week in a cautious manner as investors hold back from building risk exposure ahead of key events this week," said ETX Capital trader Ishaq Siddiqi.

"We have the German Constitutional Court ruling on the ESM on Wednesday and the Fed meeting on Thursday, both of which are major event risks.

"Germany's opposition of the ECB's bond-buying plan and the mixed data picture of the US economy prompt a huge degree of uncertainty over both events."

Last Friday, the US Labor Department revealed that just 96,000 jobs were added last month, convincing many that the Fed would act in its policy meeting this Thursday with another round of bond purchases, or quantitative easing.

"After last week's euphoric buying spree across global indices, markets are in respite mood this morning as they contemplate the chances of the US Federal Reserve taking similar action to the ECB by providing the world's largest economy with more stimulus," said Capital Spreads analyst Simon Denham.

Asian equities traded mixed on Monday, as stimulus hopes were overshadowed by growth concerns in China and the United States.

Hong Kong shares gained just 0.13 per cent and Shanghai won 0.34 per cent, while Tokyo ended flat and Seoul shed 0.25 per cent.

China's trade surplus widened to $US26.7 billion ($A25.85 billion) in August as imports registered a surprise fall, data showed on Monday, adding to expectations of a new round of stimulus measures.

The figures highlight waning strength in the world's second-largest economy, as the broader global slowdown and the European debt crisis dragged on exports which remained weak.

Exports increased 2.7 per cent in August year-on-year to $US178 billion, the General Administration of Customs said in a statement on its website. Imports fell 2.6 per cent to $US151.3 billion.

• Find a personal loan
• Find a credit card
• Find a home loan
• Find a savings account