Markets subdued as weak US open weighs on trading

LONDON (AP) -- Markets have started the week on a steady note with any optimism generated by Japanese election results fading away following a downbeat U.S. housing survey and softer-than-anticipated earnings from McDonald's.

The week had got off to a solid start, particularly in Asia, after election results in Japan gave the country's ruling coalition a majority in parliament's upper house and an apparent mandate to push ahead economic reforms.

Preliminary results from Sunday's election showed the coalition led by Shinzo Abe won a majority in the upper house.

Japan's stagnant economy is showing signs of perking up, helped by the aggressive monetary and fiscal stimulus — two of the so-called Three Arrows that Abe has let loose since he took office in late December. Stocks have surged, business confidence is improving and the weaker yen has eased pressure on exporters.

Long-term growth requires another "arrow" — measures to boost competitiveness and cope with Japan's rapidly aging population and soaring national debt.

"The win will now allow him to push on with implementing his third and final arrow, in his attempt to revive the Japanese economy which has stagnated for the last two decades," said Craig Erlam, market analyst at Alpari.

As the third-largest economy in the world, that's a potential boon for the region and that helped Asian shares post solid gains — Tokyo's Nikkei 225 gained 0.5 percent to 14,658.04.

That modest optimism carried through into the European trading session for a while before lackluster trading on Wall Street took root.

In Europe, the FTSE 100 index of leading British shares was down 0.1 percent at 6,623 while Germany's DAX was barely changed on the day, down 0.01 percent to 8,331. The CAC-40 in France was 0.4 percent higher at 3,939.

In the U.S., the Dow Jones industrial average was up 0.06 percent at 15,554 while the broader S&P 500 index was up 0.2 percent to 1,695.

A surprising fall in U.S. existing home sales in June to a seasonally adjusted annual rate of 5.08 million kept investor sentiment on Wall Street in check. A smaller than anticipated 4 percent rise in second-quarter earnings at McDonald's also weighed on trading.

Earnings from a raft of companies around the world will be closely monitored this week. Nearly a third of the S&P report this week and there's also a number of European companies due to announce their results.

Investors are also keeping a watch on developments in Portugal after the country's president accepted a compromise reached by the coalition government that allows it to stay in power, defusing a crisis that had roiled financial markets.

The yield on the country's benchmark 10-year bond — a gauge of investor sentiment — fell 0.45 percentage point to 6.28 percent.

Portugal has been relying on a financial bailout from its euro partners and the International Monetary Fund for over two years now and the prospect of the government collapsing over a disagreement over austerity had weighed on recent sentiment.

Earlier in Asia, China's benchmark Shanghai Composite Index added 0.6 percent to 2,004.76 despite concerns over the scale of the country's economic slowdown. Hong Kong's Hang Seng rose 0.2 percent to 21,356.03.

In the currency markets, the dollar was under pressure after recent strength that sent it above 100 yen. It was down 1 percent to 99.56 yen while the euro rose 0.4 percent to $1.3196.

Oil prices tracked equities downward through the day, with the benchmark New York rate down 52 cents at $107.35 a barrel.