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European stocks down on US debt struggle

London - European stocks mostly retreated on Monday with investors focused on the looming US budget deadline, and looking ahead to a meeting of EU finance ministers.

Adding to selling pressure was a disappointing batch of Chinese economic data, while on the corporate front shares in French car giant Peugeot dived.

Analysts at Moneycorp in London summed up the general market view about the US budget crisis, saying that the militant wing of the US Republican party "will recant at the last possible moment, thereby staving off default."

The US budget impasse was weighing on the dollar, however.

In London, the benchmark FTSE 100 index edged up 0.04% to stand at 6 467.37 points nearing midday in the British capital.

Frankfurt's DAX 30 fell 0.25% to 8 703.29 points and the CAC 40 in Paris lost 0.20% to 4 211.51.

"The continued division between Republicans and Democrats in reaching a conclusion to the US debt ceiling is hampering upside in equity markets," said Brenda Kelly, senior market strategist at traders IG.

Republicans and Democrats were unable to find a compromise after a rare Sunday session to hammer out a budget deal to reopen the government, which has been partially shut down for two weeks.

With the US expected to run out of cash to pay its bills on Thursday, the focus is on Washington, where President Barack Obama has urged Republicans to agree to a debt ceiling hike.

Failure to raise the spending limit would mean a default that could have a devastating effect around the world.

China and Japan - which between them hold more than $2.4trn of US debt - have urged the US to get its house in order and avert a default.

The European single currency rose to $1.3550 from $1.3543 in New York late on Friday. The dollar slipped to ¥98.29 from ¥98.58.

Sterling rose to 84.81 pence to the euro and to $1.5972.

The price of gold rose to $1 276.25 an ounce on the London Bullion Market, from $1 265.50 on Friday.

EU finance ministers to meet

EU finance ministers will try again this week to resolve deep differences over how to supervise, and if necessary close, failing banks before they can plunge the economy into crisis.

Ireland was among the worst affected by the collapse of its banks but over the weekend announced it would exit its three-year, 85-billion-euro bailout programme on schedule in December.

The Irish news, plus the fact that further aid for twice-bailed out Greece is not pressing, highlights how far the 17-nation eurozone has come since the dark days of 2009-10.

The 17-eurozone ministers meet on Monday in Luxembourg, followed by talks on Tuesday with their 11 non-euro colleagues hoping for progress on a hugely complex issue surrounded by political sensitivities.

In company news on Monday, shares in French auto group PSA Peugeot Citroen plunged on rumours that the struggling company will raise new capital, and amid talk it might tie up with a Chinese firm.

The shares dived 11.04% to €11.00 in response to media reports of a capital increase.

The group, a top name in French industry, is in trouble and struggling to carry through a deep restructuring with job cuts and a plant closure.

Shares in French software group Dassault Systemes fell by 5.87% on a profits warning.

In Asia on Monday, China said that its inflation reached a seven-month high in September.

China's consumer price index rose sharply to 3.1% last month, the government said Monday, from 2.6% in August.

Traders brushed off Saturday's figures showing an unexpected drop in exports that led to China's trade surplus narrowing to $15.2bn in September from $28.6bn in August.

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