Portugal Colonial - Stock markets diverge as eurozone economy struggles

Investors were taking a breather after the US Federal Reserve triggered a rally last week by announcing a bumper interest rate cut.

European equity markets struggled for direction, while the euro and the pound both fell against the dollar after the release of eurozone and British economic data.

Eurozone business activity declined for the first time in seven months in September, as France lost steam after the end of the Paris Olympic Games, a key survey showed.

S&P Global's purchasing managers' index (PMI) -- a key gauge of the overall health of the economy -- dropped to 48.9 in September, down from 51 in August. Any reading below 50 indicated contraction.

Joshua Mahony, chief market analyst at trader Scope Markets, said the data "cast a shadow over the recovery hopes of the eurozone".

UK PMI data fared better, with growth continuing in September but at a slower pace than the previous month.

"While the release is showing a broadly positive picture for the UK's economic prospects, concerns about the upcoming budget feature prominently in the survey," said Daniel Mahoney, UK economist at Swedish bank Handelsbanken.

Frankfurt stock markets rose but London and Paris dipped at the start of the week.

In Asia, Shanghai rose despite another round of data showed the Chinese economy remained weak.

Youth unemployment in China hit its highest level this year, as leaders struggle to kickstart growth and face calls for more stimulus -- particularly for the troubled property sector.

Investors are hoping for more growth-boosting measures in the world's second-largest economy after a decision by China's central bank to cut its 14-day lending rate.

Hong Kong shares dipped while Tokyo was closed for a holiday.

Stocks in Colombo fell after self-avowed Marxist Anura Kumara Dissanayaka won Sri Lanka's presidential election, fuelling worries about a $2.9 billion International Monetary Fund bailout that demands steep tax hikes and other austerity measures.

Oil prices edged up on worries about an escalation of the conflict in the Middle East after strikes by the Israeli army in Lebanon on Monday.

Gold sat around record highs around $2,650 after the Fed rate cut, which makes the precious metal more attractive to traders, and on geopolitical concerns.

The US Federal Reserve's jumbo interest rate cut pushed US equities to record highs last week as investors contemplated a soft landing for the world's top economy.

Eyes are now on the release this week of the personal consumption expenditures index, the Fed's preferred inflation metric, which could shed light on the next rate move.

- Key figures around 1225 GMT -

London - FTSE 100: FLAT at 8,229.63 points

Paris - CAC 40: DOWN 0.1 percent at 7,494.89

Frankfurt - DAX: UP 0.7 percent at 18,843.32

Tokyo - Nikkei 225: Closed for a holiday

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 18,247.11 (close)

Shanghai - Composite: UP 0.4 percent at 2,748.92 (close)

New York - Dow: UP 0.1 percent at 42,063.36 (close)

Pound/dollar: DOWN at $1.3304 from $1.3316 on Friday

Euro/dollar: DOWN at $1.1110 from $1.1160

Dollar/yen: DOWN at 143.77 yen from 144.02 yen

Euro/pound: DOWN at 83.54 pence from 83.80 pence

Brent North Sea Crude: DOWN 0.1 percent at $74.41 per barrel

West Texas Intermediate: FLAT at $71.00 per barrel

A.Silveira--PC