Markets

European stock markets are heading for their first losing session of the year as investors take a cautious tone with major indices at brushing two year highs.

Britain's FTSE 100 gave back 25.2 points, or 0.41 percent from Friday's close at 6,064.58 in a tepid session highlighted by stronger performances from the country's biggest banks. The Europe-wide FTSE Eurofirst 300 was also in the red my mid-afternoon London time, trading 5.8 points, or 0.5 percent lower, at 1,161.44.

Bank shares were supported by news that rules which would have required the largest lenders to set aside more capital to protects shareholders, savers and taxpayers from potential losses will delayed by at least four years. Central Bankers, including Bank of England boss Mervyn King, who chairs the Group of Governors and Heads of Supervision for the world's biggest central banks, agreed Sunday in Basel, Switzerland to give the banks more time and more choice of assets by which they must create the capital buffers.

An index of UK banking shares gained around 1.1 percent Monday following the Basel agreement.

Barclays was the day's biggest gainer on the FTSE 100, rising 3.73 percent. Lloyds Banking Group rose 1.3 percent.

US stocks also opened the first full week of the year on a cautious note, with the Dow Jones Industrial Average sliding 8.52 points, or 0.06 percent, in the opening minutes of trading on Wall Street.

The S&P 500 opened around 3 points, or 0.2 percent, lower at 1,463.47 in a retreat from the five-year high it posted at the Friday close. The Nasdaq fell 11.94 points, or 0.38 percent, to 3,089.73.

Bank of America shares fell to $12.07, a 0.4 percent decline, after the number two US bank by market value cut a $10bn deal with Fannie Mae to settle claims the bank sold the US government supported lender toxic mortgage bonds in the lead up to the global financial crisis.

Elsewhere, benchmark 10-year UK government bonds yields fell 3 basis points to 2.09 percent and back below the yield level of similarly-dated French government bonds, known as OATs, which were marked at 2.10 percent.

Gilt yields had briefly traded higher than their French counterparts last week for the first time in nearly two years following better-than-expected manufacturing data and news that the US Federal Reserve had considered removing some of its trillions in monetary stimulus a year earlier than expected.

In other UK news, supermarket operator William Morrisons posted disappointing Christmas sales figures but held firm on its full-year profit guidance of £913m.

The stock jumped 0.9 percent following the company's trading update before settling to 257 pence each by mid-afteroon in London, little changed from Friday's close. The shares have declined around 14.5 percent in the past year. 

The Morrison figures kick-off a busy week for investors in UK retail shares - and those seeking a barometer of broader retail sales for the month of December.

Tesco plc, Britain's largest supermarket chain, will report its Christmas sales figures on Thursday 10 January - the same day as clothing retailer Marks & Spencer - while rival J Sainsbury Plc will update on Wednesday 9 January. Department store chain Debenhams will post sales figures on Tuesday 8 January.