- Merkel on track to win third term
- Euro-area PMI Composite beats forecast
- ECB ready to act on banks, says Liikanen
- ECB's Draghi, US Fed members to speak
FTSE 100: -0.21%
CAC 40: 0.10
FTSE MIB: 0.27%
IBEX 35: -0.24%
Stoxx 600: -0.11%
European equities were mixed on Monday after the German elections and euro-area manufacturing and services data.
German Chancellor Angela Merkel's Christian Democratic Union (CDU) party won 41.5% of votes at Sunday's federal election - falling short of a majority to win her third term as leader of Europe's largest economy.
Merkel will need to find another coalition partner as her current partner, the Liberal Democrats, failed to gain the 5% minimum threshold required to be represented in parliament.
She will have to build a new coalition with either the Social Democrats which won 25.7% or the Green party which won 8.4%.
Meanwhile, euro-area services and manufacturing activity grew at the fastest pace in more than two years in September. Markit's Purchasing Managers' Index (PMI) Composite, covering both sectors, rose to 52.1 from 51.5 in August, beating the 51.8 estimate and the 50 reading that signals expansion.
ECB ready to act on banks, says Liikanen
The European Central Bank (ECB) is ready to act by boosting bank liquidity if credit markets require the action, according to Bank of Finland Chief and ECB member Erkki Liikanen as cited in media reports.
The ECB is rumoured to embark once again on long-term refinancing operations (LTROs) that pumped more than €1trn into banks via low interest rate loans in 2011 and 2012.
"I am ready to act, if necessary," Liikanen apparently told Italy's Corriere della Sera newspaper.
Looking ahead, ECB President Mario Draghi will speak on Monday afternoon.
Last Monday he told a conference in Berlin that a single authority was needed in Europe to restore the Eurozone's banking sector.
"We need a mechanism that allows non-viable banks to be wound down without financial stability risks, as we see in the US," he said.
His remarks came two days after Germany said the idea was legally questionable, putting him on a collision course with the country.
Draghi added that despite market improvements, the "recovery is only in its infancy".
He said the economy remains fragile and unemployment is still too high so the ECB expects key interest rates to remain at present of lower levels for an extended period of time.
Fed speeches follow stimulus decision
Federal Reserve Bank of Atlanta President Dennis P. Lockhart, Fed Bank of New York President William Dudley and Fed Bank of Dallas President Richard Fisher will speak later Monday.
Stocks rose strongly following Wednesday's surprise decision by the Federal Reserve to keep up its $85bn monthly asset purchases until it sees further economic recovery.
However, gains were mostly erased by the end of the week after James Bullard, head of the St Louis Fed, said that a tapering could come in October.
Bullard admitted that this month's decision to maintain quantitative easing was a close call and that the central bank could still trim asset purchases at its next meeting.
Investors will now turn to speeches from three other Fed policymakers for an indication of what's to come.
Aberdeen Asset Management advanced after saying it expects underlying profit before tax for the full year to reach the top end of its range estimate between £431m to £477m.
Finmeccanica SpA rose following reports of bids for some of the Italian arms company's holdings.
National Grid declined after UBS downgraded the shares
to 'neutral' from 'buy'.
Centrica's shares declined after announcing a £240m non-cash write off on gas storage projects.
The euro fell 0.12% to the 1.3508 US dollar.
Brent crude futures increased $0.174 to $109.410 per barrel on the ICE.