While you were sleeping: Spectre of December hike returns

Wall Street moved lower, while the US dollar strengthened, as Federal Reserve chairwoman Janet Yellen repeated that a December interest rate increase was possible and European Central Bank President Mario Draghi says he is prepared to add extra stimulus if needed.

In testimony to Congress, Ms Yellen says a rate hike this year was a "live possibility," underpinning the Fed's comments after its October meeting last week.

The Fed is "expecting the economy will continue to grow at a pace to return inflation to our target over the medium term," she says.

"If the incoming information supports that expectation ... December would be a live possibility for a rate increase."

Meanwhile, an ADP Research Institute report shows US companies added 182,000 workers last month, following a 190,000 increase in September. The strength of the labour market is a key gauge for policy makers.

"The private sector continues to add jobs at a healthy pace and I think it's likely strong enough that if this pace of job growth continues – if this continues over the month – it will be enough to justify a rate hike in December," Commonwealth Foreign Exchange chief market analyst Omer Eisner told Reuters.

Investors will scrutinise the government's nonfarm payrolls report, due for release on Friday. It is expected to show an increase of 180,000 jobs in October, while the unemployment rate is expected to remain at 5.1%.

Separately, a Commerce Department report shows the trade deficit narrowed by 15% to $US40.8 billion in September, the smallest since February, while a report by the Institute for Supply Management shows its non-manufacturing index rose to 59.1 in October, the highest in three months, and up from 56.9 in September.

On Wall Street, the Dow Jones Industrial Average fell 50.57 points, or 0.3%, to 17,867.58. The Standard & Poor's 500 Index slid 0.4% to 2102.48 while the Nasdaq Composite Index was virtually unchanged at 5142.48.

A lower oil price – crude futures fell 2.9% to $US46.53 – pulled down oil stocks, which had risen the day before.

Shares of UnitedHealth and Pfizer, last down 2.6% and 2% respectively, also led the Dow lower. Facebook is among the S&P 500 companies scheduled to report quarterly results today.

In Europe, the Stoxx 600 Index finished the session with a 0.9% advance from the previous close. The UK's FTSE 100 Index also climbed 0.9%, as did France's CAC 40 Index. Germany's DAX Index fell 0.4%.

Eurozone bonds also rose on Mr Draghi's comments in Frankfurt that the central bank would review the amount of stimulus needed to stoke the economy at its December meeting.

"Mr Draghi's comments are clearly supportive in the short term and earnings season so far has been reasonable although expectations weren't high," London-based Manulife Asset Management European equities head David Hussey told Bloomberg.

"European equities still look reasonable value assuming recovery continues and margins can expand back to previous levels."

(BusinessDesk)