Europe close: Markets struggle for direction as investors remain cautious ahead of critical week

European equity markets began the week on mixed a note, as investors remained jittery ahead of a Federal Reserve meeting later this week.

The benchmark DJ Stoxx 600 closed down 0.39%, while Germany’s Dax gained 0.06% and France’s CAC 40 slid 0.54%.

As of 1631 GMT, the euro was 0.25% higher against the dollar and broadly flat against both the pound and the yen, while Brent crude fell 0.46% to $44.77 a barrel.

"It is likely that today is a mere moment of respite between last week’s market-moving announcements from the ECB and the PBOC and the wave of important figures and earnings releases still to come before October ends," said Spreadex's analyst Connor Campbell.

German business confidence beats expectations

The Volkswagen scandal did not leave even so much as a dent on German businesses’ confidence, a survey from a leading think-tank revealed.

The IFO institute’s business confidence index for October slipped to a reading of 108.2 from September’s 108.5, but above of analysts’ expectations for a 107.8 reading.

However, a sub-index of companies’ expectations improved to a reading of 103.8 from 103.3 in September and ahead of consensus for a 102.4 reading.

“Surprisingly, the VW scandal did not play any role at all. Sentiment in the auto industry even improved,” said Andreas Rees, chief German economist at UniCredit Research.

“The overall manufacturing sector also held up well. As repeatedly said, we think that impulses from the US and the Eurozone will overcompensate for the weakness coming from emerging markets.”

Across the Atlantic, meanwhile, sales of new single-family homes slumped to their lowest rate in 10 months in September, tumbling 11.5% month-on-month to an annualised rate of 468,000, way below the 550,000 reading analysts had expected.

"Whether this is a sign of a wider slowdown in the US remains to be seen, yet with North East new home sales plummeting 61.8% there is a possibility this could be a regional phenomenon rather than a nationwide event. Nevertheless, the dollar certainly felt the effect of today’s announcement, falling in response," said IG's market analyst Joshua Mahony.

Deutsche Bank on the back foot

In company news, Swedish security solutions provider Securitas AB jumped 3.94% on news that financial self-service solutions provider Diebold had agreed to sell it its North America security business for approximately $350m.

Credit Suisse rose 1.57% after the Swiss bank said a group of investors will buy 1.32bn Swiss francs worth of shares, as the lender looks to raise capital and comply with stricter regulatory standards.

Meanwhile, a report from the Financial Times dragged Deutsche Bank 1.94% lower, after it revealed US regulators were expanding a money-laundering investigation into the lender’s Russian unit.