Europe's main stock markets have closed down, with traders saying many investors are staying on the sidelines ahead of an ECB interest rate decision later this week.

While indices spent most of the day in positive territory, benefiting as well from reducing tensions over Ukraine, they dropped into negative territory at the end of the trading session.

London's FTSE 100 ended down 0.26 per cent at 6,598.37 points.

In Paris, the CAC 40 fell 0.45 per cent to 4,391.50 points as official figures showed the French public deficit and debt in 2013 were higher than previous government estimates - dealing a fresh blow to President Francois Hollande a day after disastrous local polls.

Meanwhile the DAX 30 in Frankfurt shed 0.33 per cent to 9,555.91 points after news that German retail sales, a closely watched measure of household confidence, increased in February.

In a week full of data announcements, Eurostat said on Monday that eurozone inflation fell to 0.5 per cent in March, the lowest rate since October 2009 at the height of the financial crisis, raising concerns about the dangers of deflation, or falling prices.

Some analysts said this also increased pressure on the ECB to act, which would benefit stocks.

Ben May, an economist at Capital Economics, said the latest fall was due to temporary factors.

"Nonetheless, the weakness of inflation suggests that the ECB may have little option but to take further policy action," he said.

The ECB's monetary policy committee holds its monthly meeting on Thursday, and until the inflation date expectations had been it would hold its key "refi" refinancing rate at an all-time low of 0.25 per cent, where it has been since November.

However investors expecting action "risk being disappointed", said a trader at Aurel BGC in Paris.

Analyst Jasper Lawler at CMC Markets UK said there appeared to be little chance the ECB would engage in real stimulus and that a further cut in the interest rate would not help as high lending rates were not the problem.

"It seems unlikely the ECB will engage in quantitative easing unless really pushed into a corner with inflation at or below zero," said Lawler.

Christopher Dembik, an analyst at Saxo Banque, said the "closer the ECB meeting approaches, the more incentive investors will have to not take a position".

Markets are also looking ahead towards US jobs data near the end of the week, and got a boost from Janet Yellen's assurance the Federal Reserve will continue to support the economy.

AFP