World stocks fall ahead of tight US election

World stock markets fall ahead of US presidential election whose outcome remains uncertain

Associated Press

BANGKOK (AP) -- World stock markets fell Monday as investors stayed on the sidelines ahead of a looming leadership change in China and uncertainty about the outcome of the U.S. presidential election.

The race between President Barack Obama and Republican challenger Mitt Romney is virtually tied one day ahead of the election, generating an atmosphere of uncertainty that markets normally dislike.

Investors could awaken Wednesday without a clear winner. If the election comes down to a thin margin in a swing state such as Ohio, the outcome could be delayed for days or weeks.

"The worst case scenario for markets is for a prolonged period of uncertainty if the results produce no clear cut result," said analysts at Credit Agricole CIB in Hong Kong.

European stocks fell in early trading. Britain's FTSE 100 lost 0.5 percent to 5,840.39. Germany's DAX lost 0.5 percent to 7,323.80. France's CAC-40 dropped 0.6 percent to 3,470.10.

But there was less discomfort among U.S. investors ahead of the opening bell. Dow Jones industrial futures rose 0.1 percent to 13,005 while S&P 500 futures rose marginally to 1,406.

In Asia, Japan's Nikkei 225 index fell 0.5 percent to close at 9,007.44. Hong Kong's Hang Seng lost 0.5 percent to 22,006.40. South Korea's Kospi shed 0.6 percent to 1,908.22. Benchmarks in Taiwan, Indonesia and Singapore also fell. Benchmarks in Thailand, the Philippines and Australia rose.

Mainland Chinese shares lost ground after four straight days of gains. The Shanghai Composite Index lost 0.1 percent to 2,114.03 and the Shenzhen Composite Index lost 0.5 percent to 858.60.

"The losses were a technical correction due to profit-taking after the recent gains" said Zhang Yang, an analyst at Sinolink Securities in Shanghai.

A key political event also takes place this week in China, the world's No. 2 economy. Thursday marks the opening of the Communist Party congress — the once-in-a-decade forum used to name China's top leadership.

Tom Kaan, head of equity sales at Louis Capital Markets in Hong Kong, said it would be a "cause of concern" if China's new leaders do not take quick action to boost employment, particularly among the ranks of middle-income earners who have lost jobs amid the country's economic slowdown.

"Unemployment is one of the biggest concerns which nobody seems to be focusing on," he said. Investors are also hoping to see progress in the deregulation of China's financial markets.

Meanwhile, shares of South Korea's two largest carmakers plunged after the companies acknowledged overstating gas mileage on hundreds of thousands of cars sold in the U.S. Hyundai Motor Co., the country's largest carmaker, plummeted 7.2 percent and second-largest Kia Motors Corp. sank 6.9 percent.

The inflated mileage was uncovered in an audit of test results by the U.S. Environmental Protection Agency. The EPA's inquiry into the overstated figures is continuing.

Toyota Motor Corp. rose 2.2 percent after the carmaker reported it had tripled its profit in the fiscal second quarter and raised its full-year earnings forecast.

Japanese electronics firms continued to take hits. Sharp Corp. dropped 6.7 percent. Panasonic Corp. fell 5.6 percent. Fujitsu Ltd. lost 3.7 percent.

Benchmark oil for December delivery was up 2 cents to $84.88 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.23, or 2.2 percent, to close Friday in New York at $84.86 a barrel, its lowest level since July 10.

In currencies, the euro fell to $1.2784 from $1.2829 late Friday in New York. The dollar fell to 80.28 yen from 80.42 yen.

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AP researcher Fu Ting contributed from Shanghai.

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