Shares and the euro fell on Monday after the European Central Bank poured cold water on a report that its new crisis fighting plan could include buying euro zone countries' bonds if their borrowing costs breached certain levels.
Germany's central bank, the Bundesbank, had also earlier reiterated its opposition to bond purchases and a spokesman for the German finance ministry said it was not aware of any plans for the ECB to target bond spreads.
European and global markets have had a recent strong run on hopes that the plan being drawn up by the ECB, the central bank overseeing the 17 countries that use the euro, could help the currency bloc tackle its debt crisis.
Top European stocks were down 0.2 percent by 13:45 SA time after the ECB responded to the report in Germany's der Spiegel.
“It is absolutely misleading to report on decisions, which have not yet been taken and also on individual views, which have not yet been discussed by the ECB's Governing Council,” the ECB said.
The main stock indexes in the region were also down, with the exception of Germany's Dax.
The MSCI global share index moved into the red, trading down at 0.02 percent while U.S. stock index futures pointed to a mixed open on Wall Street.
The euro fell to $1.23012 down 0.25 percent on the day and to a session low of 97.79 yen.
“We are fishing in the fog at the moment so we need to see some more of the meat regarding the ECB's plans,” said Heinz-Gerd Sonnenschein, equities strategist at Germany's Postbank.
“Shares have risen a lot since June even though the earnings outlook has been downgraded, so progress from here very much
depends on the sovereign debt crisis,” he said.
Investor appetite for Spanish, Italian and other peripheral debt has picked up, at the expense of German bonds, and they held on to much of their gains after the ECB's comments.
Spanish two-year yields have already fallen sharply since ECB President Mario Draghi said on July 26 that the bank would do whatever it takes to preserve the euro, fuelling expectations the central bank would restart its bond buying programme.
However, policymakers remain in the early stages of thrashing out the details of any plan.
Some experienced ECB watchers were already doubting whether the central bank would set a bond price threshold as European
laws ban it from financing governments.
“Critical details about such a new instrument remain unclear - at least until the ECB's September meeting,” said Commerzbank
strategists in a note.
With many European policymakers on summer holidays, investors have had a respite from negative headlines.
This week's focus is on a meeting between leaders of Greece and Germany on Friday as well as details of Spain's 'bad bank'
plans, due to be announced on the same day.
The first August reading of closely watched, forward looking purchase manager index (PMI) data will come out from the euro
zone on Thursday.
Minutes from the most recent meeting of the US Federal Reserve due out on Wednesday are also on investors' radar.
Away from Europe's equities and bond markets, oil prices hovered at $114 per barrel, supported by tight North Sea supplies ahead of the closure of a key UK oilfield for maintenance and on expectations of more demand before the northern hemisphere winter.
Platinum rose to its highest in more than six weeks as supply worries lingered after violence at a major mine in South Africa, while gold firmed a touch.
Corn prices rose to their highest in more than a week, resuming a recent rally on supply concerns arising from the US grain belt's worst drought in 56 years.
Wheat edged in the other direction as the market took a breather after gaining for three straight sessions on fears of tightening global supplies and expectations of curbs on exports from the Black Sea region. - Reuters