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European shares slip ahead of knife-edge US election

David Brett
Monday, 5 Nov 2012 | 9:00 AM ET

* FTSEurofirst down 0.5 percent

* Healthcare, food outperform as investors opt for safety

* Miners wane after weak China service data

* Banks fall as HSBC announces hit to Q3 profit

* Ryanair gains as the airline raises its outlook

LONDON, Nov 5 (Reuters) - European stocks edged lower in cautious trade on Monday as investors opted for safer havens ahead of a too-close-to-call presidential election in the United States this week.

By 0835 GMT, the FTSEurofirst 300 shed 5.93 points, or 0.5 percent, to 1,109.26, with investors hedging their bets after the index rose 1.6 percent last week, nearing the top of its recent trading range around 1,120.

``Tuesday's U.S. presidential election dominates the week's events,'' Ian Williams, strategist at Peel Hunt, said.

``Re-election for Obama may be priced into the markets, as is some prospect of a compromise to delay the impact of the 'fiscal cliff'; with the Republicans retaining control of the House - although the outcome is not yet certain,'' he said.

A rise in the dollar index to its highest level since central banks acted to support the global financial system in early September provided evidence that investors are looking for protection ahead of the election.

In equities, food and beverages and healthcare outperformed the broader market.

Basic resource stocks weighed most on the index with sentiment further dented after data showed China's service sector unexpectedly weakened in October.

Banks fell too as investors opted for more defensive assets, with heavyweight HSBC, which shed 1.8 percent after results, also dragging on the sector.

Europe's biggest bank's third-quarter profit took a $1.15 billion hit to cover a potential U.S. fine for lax anti-money laundering controls and UK mis-selling.

EARNINGS FOCUS

Among individual movers, mail delivery firm Post NL fell 6.8 percent after saying it expects mail volume to decline by to 10 percent.

That knocked peer TNT Express which shed 3.1 percent. TNT recently announced a 12 percent fall in quarterly profit.

Some 48 percent of European companies have missed profit expectations so far in the third-quarter, lagging a far better performance from U.S. peers.

The index's top gainers were those companies that offered some light for investors at the end of a gloomy earnings tunnel.

A 10 percent jump in first-half profit and raised guidance propelled Irish low cost airline Ryanair 9 percent higher, helping lift peer Easyjet and the broader travel and leisure sector.

Weir climbed 4.2 percent after the firm assuaged concerns over the outlook for engineers by saying it was on track to meet expectations for the full year.

Despite nearly half the companies that have so far reported in Q3 missing expectations, analysts have increased fourth-quarter estimates by around 1 percent for those corporates.

But broader maket moves continue to be dominated by macro themes, adding to investor uncertainty.

As well as the U.S. presidential election there is once-a-decade power transfer in China, and Greece's attempt to gain political support for measures to obtain further aid.

``The fact that you have so many in the same week makes forecasting where the markets may be by Friday next to impossible,'' a London-based trader said.

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