While you were sleeping: Focus back on Janet Yellen

Wall Street moved lower as investors look to Thursday's speech by US Federal Reserve Chair Janet Yellen for clarity about policymakers' outlook on the economy at home and abroad.

Oil dropped, with US crude down more than 4%, after a private manufacturing gauge in China slid to the lowest level since March 1999, while US reports showing a drop in inventories failed to stem concern about a glut.

On Wall Street, the Dow Jones Industrial Average closed down 0.3% at 16,279.89 after a choppy day's trading. The Standard & Poor's 500 Index declined 0.2% to 1938.76, while the Nasdaq Composite Index slipped 0.1% to 4752.74.

Declines in shares of United Technologies and those of Caterpillar, last down 2% and 1.8% respectively, led the Dow lower.

Eyes are on Ms Yellen who is set to speak a week after the central bank held off on raising its benchmark interest rate, citing concern about the global economy.

"People are hoping that she'll make some further comments that will take away some of the confusion and uncertainty about her comments last week," New York-based Miller Tabak & Co equity strategist Matt Maley told Bloomberg.

Meanwhile, a Markit report showed the preliminary US manufacturing purchasing managers' Index for September held steady from the previous month at 53, the lowest level since October 2013.

"However, the survey is indicating the weakest manufacturing growth for almost two years, meaning the sector will have acted as a drag on the economy in the third quarter," Markit's chief economist Chris Williamson says.

"As such, GDP growth is likely to have slowed from 3.7% in the second quarter to 2.5% at best in the three months to September."

In Europe, the Stoxx 600 Index finished the session with a 0.1% increase from the previous close. France's CAC 40 Index added 0.1%, while Germany's DAX Index gained 0.4%, and the UK's FTSE 100 Index climbed 1.6%.

European Central Bank President Mario Draghi, in testimony to the European Parliament's Economic and Monetary Affairs Committee in Brussels, pointed to a "more challenging" macroeconomic environment.

"Over the summer, industrial production and other indicators of economic activity showed signs of resilience," Mr Draghi says. "At the same time, the macroeconomic environment has become more challenging.

"More time is needed to determine in particular whether the loss of growth momentum in emerging markets is of a temporary or permanent nature; the driving forces behind the drop in the international price of commodities; and what is behind the recent episodes of severe financial turbulence.”

The battered shares of Volkswagen jumped 6.6% after chief executive Martin Winterkorn resigned following revelations that the car maker installed software in about 11 million of its diesel-powered models that allowed them to falsely pass emissions tests.

"He had little choice," Michigan University business professor Erik Gordon told Bloomberg. "The company's reputation is in tatters."

(BusinessDesk)