Wall Street traded higher, though both the Dow and the Nasdaq gave up some of their earlier gains, as investors tried to gauge the odds of a US interest rate increase next month.

Two Fed officials, St. Louis Fed President James Bullard, and San Francisco Fed boss John Williams, underpinned recent signals by the central bank that a rate hike might happen sooner then later.

"I do worry that keeping rates too low for too long could feed into future financial instability even if it doesn't look like we're in that situation today," Bullard, a voting member of the Fed's policy-setting committee, told reporters, according to Reuters.

A slew of economic data in the coming days will be closely watched.


"The market is just trying to digest what the Fed mentioned in the minutes last week," Mark Kepner, managing director and equity trader at Themis Trading in New York, told Bloomberg. "Everyone is going to be looking at what's coming out this week with housing, PMI and wages especially."

Wall Street advanced. In 2.46pm New York trading, the Dow Jones Industrial Average added 0.22 per cent, while the Nasdaq Composite Index gained 0.24 per cent. In 2.33pm trading, the Standard & Poor's 500 Index eked out a 0.1 per cent advance.

The Dow moved higher as gains in shares of DuPont and those of Apple, trading 2 per cent and 1.6 per cent higher respectively, outweighed declines in shares of Verizon and those of Microsoft, recently trading 1 per cent and 0.8 per cent weaker respectively.

"The market will be pretty range bound till we get a better sense of what's happening with the Fed," Adam Sarhan, chief executive of Sarhan Capital in New York, told Reuters. "Right now, we're getting a lot of cross currents from the central bank and investors are looking for more direction with [Fed Chair Janet] Yellen speaking on Friday."

Europe's Stoxx 600 Index ended the session with a 0.4 per cent drop from the previous close.

The UK's FTSE 100 index slipped 0.3 per cent, while France's CAC 40 index and Germany's DAX index both shed 0.7 per cent.

Shares of Germany's Bayer closed 4.8 per cent lower at 85.18 euros in Frankfurt after the company said it offered to buy Monsanto for US$62 billion in cash, or US$122 a share, in a bid to create a global agricultural leader.

"The price that has now been disclosed is at the upper limit and it is just about economical," Markus Manns, a fund manager at Union Investment, Bayer's 14th biggest investor, told Reuters. "Should it rise further, which is to be assumed, the takeover will become increasingly unattractive."

While Monsanto shares rose on the offer, the stock traded only as high as US$109.37. As of 1.02pm in New York, Monsanto traded at US$106.90, a 5.3 per cent gain from Friday's closing price. The discount to Bayer's offer price reflects both concern that the mega-merger might not be palatable to regulators while it also shows expectations that Monsanto might demand a higher price, analysts said.

Meanwhile, CF Industries, a US maker of fertilisers, and OCI, a Dutch competitor, said they abandoned their US$8 billion merger plans because of the new US tax rules that are aimed at curbing so-called inversion deals.

Shares of OCI sank 9.9 per cent in Amsterdam. Shares of CF Industries climbed, trading 6.6 per cent as of 1.32pm in New York.