European stocks fall as traders eye Fed

Europe's main stock markets dropped on Monday with all eyes on the Federal Reserve ahead of its key interest-rate meeting this week.

Focus was also firmly on China after a mixed bag of economic data from the world's second biggest economy.

London's benchmark FTSE 100 index slid 0.62 percent to stand at 6,117.70 points in late morning deals.

In the eurozone, Frankfurt's DAX 30 slid 0.85 percent to 10,123.00 points and the CAC 40 in Paris shed 1.0 percent to 4,548.70 compared with Friday's close.

The mere prospect of higher US interest rates, and thus higher returns for investors, is boosting the dollar against the euro, which dipped slightly to $1.1328 from $1.1333 late on Friday in New York.

Amid concerns over China, the possibility that the Federal Reserve could raise interest rates for the first time in more than nine years this week has injected new levels of anxiety in the global economy.

"It's going to be a very interesting week in the financial markets in which we could see the return of the volatility of recent weeks as the Federal Reserve is tasked with making one of the hardest policy decisions for many years," said Craig Erlam, senior market analyst at Oanda trading group.

The issue is whether to pull the benchmark federal funds rate up from zero percent, where it has been frozen since the financial crisis of 2008.

The Fed itself is anxious to get off that extraordinarily low level, and US economic growth is strong enough to handle a quarter-point rate increase, a number of Fed officials have suggested.

But following turmoil in global financial markets over the past month, there remains much to be known about how China's problems will affect the rest of the world.

"With global financial markets remaining sensitive to fresh news from China, the latest set of Chinese data proved fairly disappointing and cemented concerns about the economy," Rabobank said in a note to clients.

China on Sunday released another set of figures that underline weakness in its huge economy -- the main driver of global growth -- following soft reports last week.

The government said growth in industrial production increased below expectations in August while retail sales accelerated a little more than forecast.

On the corporate front meanwhile, European planemaker Airbus was Monday inaugurating its first production plant in the United States, taking its fight for a bigger market share to rival Boeing's backyard.

The $600-million facility in Mobile, Alabama, is due to eventually employ about 1,000 workers. Airbus shares were down 0.40 percent at 55.35 euros in Monday trading.