Equity investors started the week half-heartedly, waiting to see how France and Greece handle their economic problems, after much of the euro zone was slapped with a credit-ratings downgrade.
Britain's FTSE 100 was flat at 5,636.19 points. France's CAC 40 dipped 0.2 per cent, while Germany's DAX rose 0.3 per cent. Japan's Nikkei fell 1.4 per cent, while Hong Kong's Hang Seng lost 1 per cent. U.S. stock markets were closed on Monday for Martin Luther King, Jr. Day.
Standard & Poor's cut nine of the euro zone's 17 countries on Friday, with France and Austria losing their top-notch status, and said it would decide shortly whether to downgrade the euro zone's bailout fund from triple-A.
Moody's said Monday it was maintaining France's AAA rating and a stable outlook for its debt. French Budget minister Valerie Pecresse said she was optimistic that S&P's knockdown would not lead to a rise in borrowing costs. A French short-term bond auction later in the day is seen as a test of the impact of the downgrade.
French President Nicolas Sarkozy meets later Monday with Spain's new Prime Minister, Mariano Rajoy, whose country was also downgraded Friday by S&P.
Also making investors nervous are stalled talks over a Greek bailout, putting Athens under pressure to complete a deal with private creditors to cut debt to more sustainable levels or risk default in March. Last October, Greece's partners in the euro zone approved a deal under which creditors agree to take a cut in the value of their bond holdings. Negotiations will resume this week after being abandoned last Friday.
Banks deposited a record 493.3-billion euros at the European Central Bank, a sign that they remain concerned over the debt crisis. Financial institutions are awash with cash, thanks to 489-billion euros in low-interest crisis loans handed out by the ECB in late December. Many appear are afraid to lend money to another bank for fear they won't get paid back.
Copper steadied, rising 0.64 per cent to $8,051 (U.S.) a tonne.
In the oil markets, simmering tensions in the Middle East and a possible strike by oil workers in Nigeria dominated sentiment. Benchmark oil rose 64 cents to $99.34 per barrel in electronic trading on the New York Mercantile Exchange.
Gold rose $14.20 to $1,645 an ounce.