(Alliance News) - European equities made an uncertain start to the final quarter of the year, with less-than-stellar manufacturing sector readings across the continent hurting already ropey market sentiment.

Equity markets were already contending with fears that US interest rates will be higher for longer.

The FTSE 100 index fell 25.51 points, or 0.3%, at 7,582.57. The FTSE 250 lost 34.92 points, or 0.2%, at 18,244.50, and the AIM All-Share was 1.41 points lower, 0.2%, at 724.77.

The Cboe UK 100 was down 0.6% at 756.48, the Cboe UK 250 also fell 0.6% at 15,924.07, and the Cboe Small Companies slipped 0.1% to 13,472.40.

In European equities on Monday, the CAC 40 in Paris dropped 0.3% and the DAX 40 in Frankfurt lost 0.2%.

Stocks in New York are set for a mixed open. The Dow Jones Industrial Average is called 0.1% lower, the S&P 500 flat and the Nasdaq Composite up 0.2%.

AJ Bell analyst Russ Mould commented: "It's been a testing time for markets as investors weigh up the likelihood of sticky inflation and interest rates remaining higher for longer. There is a balancing act for central banks – they want to fight inflation but equally they want to avoid being too aggressive with rate hikes and putting their economy into recession.

"Data has been central to their decision-making and this week will see the release of some important figures shedding light on the state of one key economy. In the US today, we get manufacturing PMI data which will show if purchasing managers are feeling confident about buying equipment, normally an important economic indicator."

The US PMI reading is released at 1445 BST. Later in the week, all eyes will be on the latest jobs market data, with nonfarm payrolls out on Friday.

Sterling was quoted at USD1.2154 early Monday afternoon, down from USD1.2207 late Friday. The euro traded at USD1.0539, lower against USD1.0585. Against the yen, the dollar was quoted at JPY149.72, up versus JPY149.30.

The latest S&P Global/Chartered Institute of Procurement & Supply UK manufacturing purchasing managers' index rose to 44.3 points in September, from August's tally of 43.0 in August.

The latest reading remained below the 50-point no-change mark, signalling the sector is still in decline.

"Output, new orders and employment were all cut back further, amid weaker intakes of new work from both domestic and overseas clients," S&P Global said.

"Demand was impacted negatively by ongoing market uncertainty, the cost-of-living crisis and weak conditions in overseas markets."

Over in the eurozone, the manufacturing sector saw a muted conclusion to the third quarter of the year, with new orders declining somewhere near record pace.

The latest HCOB manufacturing purchasing managers' index reading fell to a two-month low of 43.4 points in August, from 43.5 in September, edging further below the 50.0 no change mark.

It is the 15th month on-the-spin that the PMI has been in contraction territory.

Declines were seen largely across the board, though Greece was an exception, with its manufacturing PMI amounting to 50.3 points, still an eight-month low, however. Germany sat at the bottom of the pile, alongside Austria, with a PMI score of 39.6, though that was a three-month-high for the Europe's largest economy.

In London, Antofagasta shares rose 1.4%, among the best FTSE 100 performers, as Citi raised the stock to 'buy'. It was a largely decent day for the natural resources sector in London, with Rio Tinto adding 0.4% and Glencore climbing 0.5%.

Water utilities also impressed, with United Utilities up 1.8% and Pennon climbing 3.2%.

United, and Pennon's South West Water, reported business plans for the five-year period ending 2030. They do so in the wake of the Thames Water debacle in the summer. Thames Water had gone cap in hand to its investors after suffering financial woe.

AJ Bell's Mould added: "The water utilities are in the spotlight in a way they haven't been for a long time and which could be making them feel quite uncomfortable.

"It's in this context that the likes of Severn Trent last week and Pennon and United Utilities today are announcing big investment programmes as part of their business plans submitted to regulator Ofwat. They are looking to reduce the levels of pollution which have made their names mud with environmental campaigners and the public."

Elsewhere in London, XP Power slumped 44% as it warned third-quarter trading was below expectations.

The Singapore-based manufacturer of power controllers said: "The economic uncertainty in China has also led to a reduction in demand in that market. These conditions are likely to continue for the remainder of the year, leaving the outlook below our prior expectation, with operating profit for the year ended 31 December 2023 now expected to be broadly similar to last year."

Gulf Keystone surged 25%. Turkey said Monday that an Iraqi oil pipeline that ceased operations in March because of a complex payments dispute involving the Kurdish autonomous region will resume pumping crude this week.

Turkey closed the pipeline after an arbitration court ordered Ankara to pay about USD1.5 billion in damages to Baghdad for transporting oil from the Kurdistan region without Iraq's approval.

A barrel of Brent oil climbed to USD93.18 a barrel on Monday afternoon, up from USD92.64 at the time of the London equities close Friday. Gold traded at USD1,834.08 an ounce, lower than USD1,856.33 on Friday.

By Eric Cunha, Alliance News news editor

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