A lower start is predicted for UK stocks this morning, as the US markets return after being closed on Friday and tracking declines seen over in Asia during the night.
Sentiment is also likely to be affected by a report released this morning that showed UK manufacturing confidence fell in June for the first time in 14 months amid fears about rising costs and a skills shortage.
City sources predict the FTSE 100 will open around nine points lower than Friday's close of 6,866.05.
Alpari's James Hughes said: "European markets look set to start the day in negative territory for Monday's session as traders brace themselves for the a return of the US markets after Friday's Independence Day holidays [...] Overnight Asian stocks fell back somewhat as profit takers jumped in after equity markets hit six-year highs last week. With the US returning today the question will be asked yet again as to when this bubble in equity markets is going to end.
"Major indices around the world have been relentlessly pushing higher, however the moves have been on the back of hardly any volume and even less volatility. This is always a worrying sign as it shows the gains are bit on very week foundations, and that any slight pull back could well be greatly exaggerated. It won't take much to spook investors and forced those riding big profits to start closing out."
UK manufacturing confidence drops for first time in over a year
The BDO Optimism Sub-Index for manufacturing, which predicts growth expectations in six months' time, fell to 119.5 in June from 121 in May, albeit above the 100 level indicating long-term growth.
Manufacturers are taking a more considered approach to potential challenges, such as rising operating costs, which could limit growth, BDO explained.
BDO Partner Peter Hemington urged the Bank of England to be firmer and more consistent in its interest rate forecasts.
"UK manufacturers are under growing pressure from a shrinking pool of skilled workers and potential input cost increases, but confidence in the sector is high," he said.
Looking ahead to the rest of the week, the important data due out includes the latest Bank of England rate decision and the release of the minutes of the Federal Open Market Committee (FOMC) meeting, which Hughes predicted could spark a pick-up in both volume and volatility.
"However there is no doubt that Wednesday's meeting minutes are the major focus, and with many of us looking at just what will be the catalyst for this sharp correction on the horizon, taking an eye off Janet Yellen and the Fed would be a very foolish thing to do as stranger things have happened than a sudden increase in tapering or even stronger hints of a rate hike," he added.
SABMiller unveils plan to sell Tsogo Sun stake
Drinks giant SABMiller has announced its plan to sell its 39.6% stake in gaming and entertainment group Tsogo Sun, which it will do through a placing and a buy back transaction. Its holding in the group is valued at around $1,089m, based on Friday's closing price.
Mining giant Anglo American is to offload its 50% stake in UK aggregates joint venture with French group Lafarge, just a year and a half after it was formed. The holding will be sold for a minimum value of £885m on a debt- and cash-free basis.
Segro, the FTSE 250 real estate investment trust (REIT), has signed a deal for the sale of Pegasus Park in Brussels for £66.2m. The group said the proceeds were in line with the book value as at the 2013 year-end and represented a yield to Segro of 9%. The transaction is expected to complete in the third quarter.