London (AFP) - European and US stocks diverged on Monday as investors marked time ahead of a meeting of the Federal Reserve this week that may provide fresh clues about prospects for higher interest rates as inflation soars.

Wall Street was mostly lower in late morning trading in New York, with the S&P 500 coming off a record high. Europe’s main indices mostly posted gains, after Tokyo rose in thin Asian trading owing to regional public holidays.

London investors brushed off the expected announcement Monday from the UK government that it will delay the lifting of its remaining lockdown restrictions, with the blue-chip FTSE 100 rising to its highest level this year.

Frankfurt’s DAX 30 hit a new record high, but ended the day slightly lower.

The next potentially major moving event is the US Fed’s two-day meeting that concludes on Wednesday.

“The Fed is largely expected to maintain its current level of monetary assistance and is again expected to reiterate its view that the current inflationary spike is a passing phase,” noted Richard Hunter, head of markets at Interactive Investor.

“Even so, there have more recently been suggestions that discussions on tapering relief are likely to be nearing the top of the agenda, even if this does not lead to imminent action.”

Markets appear to have accepted Fed insistence that the inflation spike in the US and elsewhere will be temporary and that its ultra-loose monetary policies – including record low interest rates – will be maintained for the foreseeable future.

There had been a worry that soaring prices would force the bank to taper its bond-buying scheme earlier than first thought.

Confidence among investors though remains high as vaccine rollouts, the easing of containment measures, central bank largesse and government stimulus provide support, with observers forecasting a rally that began in April 2020 will continue into next year.

Looking ahead to the Fed meeting, Bank of Singapore chief economist Mansoor Mohi-uddin said the central bank is this week “likely to start discussing when it will begin slowing its quantitative easing (stimulus), given the US economy’s strong rebound from the pandemic”.

But he expects it to wait “until as late as December before announcing it will start tapering in early 2022” as it awaits a stronger jobs market and steadier inflation.

- Oil, bitcoin rally -

Elsewhere Monday, oil prices continued their run higher on stronger demand expectations, with Brent reaching $73.64 per barrel – the highest level since April 2019.

“Car vehicle use is starting to return to pre-pandemic use in the US and Canada, while in the UK it already has returned to levels just prior to the pandemic as less people use public transport and use their own vehicles to move around,” noted market analyst Michael Hewson at CMC Marekts UK.

Bitcoin bounced back $40,000 for the first time in more than two weeks after Elon Musk said at the weekend that his Tesla company would accept payments in the unit again when it is mined using cleaner energy.

The electric car maker in February said that customers could use cryptocurrency, sending bitcoin surging, before Musk changed his mind citing environmental concerns.

Bitcoins are produced by powerful computers that have to solve equations and consume huge amounts of electricity in the process.

- Key figures at 1530 GMT -

New York - Dow: DOWN 0.6 percent at 34,258.12 points

EURO STOXX 50: UP 0.2 percent at 4,136.29

London - FTSE 100: UP 0.2 percent at 7,146.68 (close)

Frankfurt - DAX 30: DOWN 0.1 percent at 15,673.64 (close)

Paris - CAC 40: UP 0.2 percent at 6,616.35 (close)

Tokyo - Nikkei 225: UP 0.7 percent at 29,161.80 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: UP at $1.2125 from $1.2109 at 2050 GMT on Friday

Pound/dollar: DOWN at $1.4112 from $1.4113

Euro/pound: UP at 85.92 pence from 85.77 pence

Dollar/yen: UP at 109.99 yen from 109.66 yen

Brent North Sea crude: UP 0.7 percent at $73.21 per barrel

West Texas Intermediate: UP 0.7 percent at $71.39 per barrel