Markets subdued as US earnings disappoint

Markets subdued as US earnings fail to excite in run-up to final presidential debate

Associated Press

LONDON (AP) -- Financial markets started the week on a flat note after another batch of fairly disappointing U.S. corporate earnings and ahead of the final debate in what appears to be a tight U.S. presidential election.

With a dearth of economic data this week and with no major scheduled events relating to Europe's debt crisis, investors will likely focus on developments in the U.S.

A weak earnings forecast from heavy equipment maker Caterpillar and other poor corporate results disappointed investors Monday. European markets lost most of their gains while Wall Street opened flat.

Later in the day, the focus will turn to the tech sector, with Yahoo due to publish a trading update. Last week, disappointing results from Google and Microsoft caused a broad retreat in stock markets.

In Europe, Germany's DAX was down 0.7 percent at 7,328 while the CAC-40 in France fell 0.6 percent to 3,483. The FTSE 100 index of leading British shares was 0.2 percent lower at 5,882.

Britain's BP was in the spotlight after it confirmed it was selling its 50 percent stake in TNK-BP to Rosneft for $17.1 billion in cash and a 12.84 percent stake in the Russian oil group. It's planning to use some of the money it's reaped from the sale to raise its stake in Rosneft to 19.75 percent. BP shares were 1.8 percent lower.

In the U.S., the Dow Jones industrial average was down 0.05 percent at 13,245 while the broader S&P 500 index was off 0.23 percent at 1,429.

The battle for the White House is also beginning to affect financial markets, not least because the race between Barack Obama and Mitt Romney appears to be extremely close. The candidates will on Monday hold their last debate, which is expected to focus on foreign affairs.

"Of interest will be whether Romney reinforces his pledge to recognize China as a currency manipulator, which could lead to growing protectionism between the two countries," said Benjamin Reitzes, an analyst at BMO Capital Markets.

Earlier in Asia, trading was subdued. Japan's Nikkei 225 rose just 0.1 percent to close at 9,010.71, weighed down by a widening of its trade deficit in September.

South Korea's Kospi lost 0.1 percent to 1,941.59 while Hong Kong's Hang Seng rose 0.7 percent to 21,697.55.

Mainland Chinese shares also posted gains. The Shanghai Composite Index rose 0.2 percent to 2,132.76 and the smaller Shenzhen Composite Index gained 0.5 percent to 882.03.

In other markets, the euro garnered some support from Spanish regional elections. Voters in Prime Minister Mariano Rajoy's northwestern home region of Galicia gave their support to his party, a vote of confidence in his handling of the economy. Europe's single currency was 0.3 percent higher on the day at $1.3060.

"There is a lot of optimism in Europe that we could see Spain negotiate a bailout in the coming weeks," said James Hughes, chief market analyst at Alpari. "It is believed that Rajoy wanted to wait until after the regional elections in Spain to make the request."

Spain has been under pressure to tap a new bond-buying facility from the European Central Bank that has been designed to keep a lid on borrowing costs for struggling countries. So far, hopes that Spain will do so have kept its interest rates down in bond markets. The yield on the country's 10-year bond remains was trading at a rate of 5.48 percent.

In the oil markets, a barrel of benchmark oil for November delivery was 54 cents lower at $89.92 in electronic trading on the New York Mercantile Exchange.

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