European shares rise ahead of economic data

The pan-European STOXX 600 index was 0.2% higher at 515.5 points

European shares rose slightly on Monday, though gains were capped by caution as investors tread carefully in anticipation of a wave of crucial economic data from the region this week.

The pan-European STOXX 600 index was 0.2% higher at 515.5 points. The benchmark posted its worst day in more than a month on Friday.

Business activity in the euro zone declined unexpectedly in September, as per data released earlier in the day. The bloc's PMI skidded to 48.9 from 51 in August.

The downturn seemed broadbased with Germany, Europe's biggest economy, seeing its decline deepen while France - the currency union's second largest - returned to contraction.

Germany's DAX rose 0.3% higher after PMI figures showed that business activity dropped in September at its sharpest pace in seven months.

France's CAC 40 declined 0.3% after data indicated its services sector declined sharply in September.

British flash PMI figures for September are expected at 0830 GMT.

Board members from the ECB are set to speak through the week, with Frank Elderson and Piero Cipollone speaking later in the day.

The euphoria from the U.S. Fed's big rate cut, which had triggered a market rally globally, is fading as investors shift their focus to potential further cuts.

Attention is on the core PCE index, the Fed's preferred inflation measure, due on Friday. This data will indicate if more rate adjustments are imminent.

The number of cuts is not the main risk to equities. It is a much weaker growth, according to Lilian Chovin, head of asset allocation at Coutts.

What's next for European equities - you want to start seeing an uplift in earnings, which haven't been very strong, Chovin added.

The Swiss National Bank is expected to reduce rates by a quarter point on Thursday, while Sweden's central bank is expected to ease by 25 bps on Wednesday.