Europe's markets edge higher ahead of US election

[November 04, 2008]  LONDON (AP) -- European markets edged higher Tuesday following mixed trading in Asia overnight with activity subdued ahead of the U.S. presidential election and Thursday's interest rate decisions from the European Central Bank and the Bank of England.

The FTSE 100 index was 0.49 points, or 0.01 percent, higher at 4,443.77, while Germany's DAX was up 21.59 points, or 0.4 percent, at 5,048.43. France's CAC-40 was 23.82 points, or 0.7 percent, higher at 3,551.79.

Notable movers Tuesday include Marks & Spencer PLC, Britain's largest clothing retailer, which saw its share price rise 8 percent as third-quarter net profit came in ahead of expectations despite falling 43 percent from a year ago.

And carmaker BMW AG saw its share price fall 5 percent after it reported a 63 percent slump in third quarter net profit as the global economic turmoil made consumers more reluctant to shell out for its sports and luxury cars and credit costs made it difficult for consumers and the company to borrow.

Overnight, most Asian stock indexes were more or less flat, apart from Japan's Nikkei, which surged 537.62 points, or 6.3 percent, at 9,114.60 as the market played catch-up after being closed Monday, when most of Asia firmed.

"The markets have settled into a kind of torpor, at least by their recent volatile standards, as we await stimulus both in the sense of monetary policy later in the week and news flow regarding the result of today's U.S. presidential election," said Daragh Maher, an analyst at Calyon.

Opinion polls on the eve of the vote show that Democratic candidate Senator Barack Obama was leading Republican rival Senator John McCain, and that the Democrats could be on course to take a firm grip of Congress.

The Dow Jones index of leading shares, which closed Monday 5 points lower at 9,319.83, traditionally does well between the day of the U.S. election and the end of the year, though the boost ends up short-lived.

"The bad news is that the honeymoon has tended to end rather quickly," said John Higgins, an analyst at Capital Economics.

Trading is expected to be subdued on Wall Street later. Dow futures were up 58 points, or 0.6 percent, to 9,389, while S&P futures were up 6.7 points, or 0.7 percent, to 976.2.

Also of importance to the markets direction this week is Thursday's interest rate decisions from the European Central Bank and the Bank of England.

Both are expected to follow the U.S. Federal Reserve's lead and cut interest rates by at least half a percentage point, though there's talk that the Bank of England may reduce interest rates by as much as a full percentage point for the first time since four cuts of that size in 1992-3 when Britain's economy was last mired in recession.

Earlier, Australia's financial issues improved after the Reserve Bank of Australia slashed rates for the third time in as many months, reducing its cash rate by a larger than anticipated 0.75 percentage points to 5.25 percent. That helped the S&P/ASX 200 index pare earlier losses to close largely flat.

Hong Kong's Hang Seng Index added 0.3 percent to 14,384.34 after fluctuating through the day, with bank shares up as lending conditions eased further. Hong Kong's interbank lending rate, known as Hibor, for three-month loans fell to 2.79 from 3.08, and the territory's central bank injected $853 million Hong Kong dollars into the market Monday night.

South Korea's Kospi rose 2.2 percent, while benchmarks in Singapore and Shanghai fell.

In mainland China, the market dropped for a third day, led by mining and metals stocks. The benchmark Shanghai Composite Index slipped 0.8 percent to 1,706.7. Losers included China Shenhua Energy Ltd., the country's biggest coal producer, and Kailuan Clean Coal Ltd.

Oil prices fell, with light, sweet crude for December delivery declining $0.67 to $63.24 a barrel in European trade on the New York Mercantile Exchange.

In currencies, the dollar fell 0.1 percent to 98.98 yen, and the euro was 0.6 percent higher at $1.2719.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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