European stocks turn mixed; London’s FTSE 100 underperforms

European stocks turned mixed on Monday, as markets stabilized following a broad based selloff in stocks and emerging market currencies on Friday.

During European afternoon trade, the EURO STOXX 50 inched up 0.4%, France’s CAC 40 added 0.2%, while Germany’s DAX 30 dipped 0.1%.

The German research institute Ifo said its business climate index rose to 110.6 in January, above forecasts for a reading of 110.0 and up from 109.5 in December, indicating that businesses in the euro zone’s largest economy had a strong start to the year.

Financial stocks were broadly higher, as French lenders BNP Paribas and Societe Generale advanced 1.6% and 1.4% respectively, while Italy's Intesa Sanpaolo climbed 1.2%.

German chemical maker Lanxess surged 8% after naming Merck Finance Chief Matthias Zachert as its new chief executive officer. Merck shares tumbled 10.2% on the news.

Elsewhere, in London, FTSE 100 tumbled 1.2%, as investors reacted to disappointing corporate news.

BG Group shares plummeted 15.5% after the natural gas producer provided weak guidance for 2013 earnings and said that it has issued force majeure notices under its LNG agreements in Egypt.

Vodafone saw shares fall 5.5% after AT&T said it has no intention of making an offer for the U.K. telecom operator. Separately, The Times reported that Vodafone has approached the private equity owners of Spanish broadband operator ONO about a potential GBP7 billion offer.

Meanwhile, in the U.S., equity markets pointed to a modestly higher open. The Dow Jones Industrial Average futures pointed to a 0.35% increase, S&P 500 futures signaled a 0.35% gain, while the Nasdaq 100 futures indicated a 0.2% rise.

Dow heavyweight Caterpillar saw shares surge 5.9% ahead of the open after reporting better-than-expected fourth quarter earnings and revenue figures.

Investors were looking ahead to the outcome of the Federal Reserve’s monthly meeting on Wednesday, amid expectations for a reduction in its bond buying program to USD65 billion from the current USD75 billion.

The policy meeting will mark the last for outgoing Fed Chairman Ben Bernanke, as current Vice Chair Janet Yellen prepares to take over.