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Markets subdued as focus remains on US

LONDON -- Financial markets were on the defensive Tuesday ahead of another round of U.S. corporate earnings, including from Facebook, and amid uncertainty over the outcome of the U.S. presidential election.

The U.S. has been center stage this week as the earnings season continues and as the election looms. So far earnings have been mixed, particularly from the technology sector.

"We are currently in the third week of a disappointing corporate earnings season," said Craig Erlam, market analyst at Alpari.

Facebook's earnings results after the market close will be key for its future. The social network has had a dire time since its stock flotation earlier this year, losing over a third of its value, as investors have grown concerned about the company's ability to raise money from advertising.

"The results have the potential to make or break Facebook as an investment," said Erlam.

Over-arching the focus on earnings is the battle for the White House, with opinion polls showing the two candidates are in a dead heat. Last night's debate between President Barack Obama and Mitt Romney appears to have done little to change that.

Meanwhile, the Federal Reserve starts its regular two-day policy meeting Tuesday but little is expected in the midst of the election.

By late morning in Europe, Germany's DAX was down 0.9 percent at 7,265 while the CAC-40 in France fell 0.6 percent to 3,464. The FTSE 100 index of leading British shares was down 0.8 percent at 5,837.

Wall Street was poised for a lower opening, with Dow futures down 0.5 percent and the broader S&P 500 futures 0.7 percent lower.

In Europe, there was little scheduled news regarding the debt crisis to drive investor sentiment. Over the past few weeks, markets have been shored up by hopes that Spain will soon tap a new bond-buying facility from the European Central Bank and expectations of further stimulus measures from Beijing.

"With the main market drivers being a Spanish bailout request and substantial Chinese stimulus being largely priced in and having not come to pass, investors are growing increasingly nervous," said Mike McCudden, head of derivatives at Interactive Investor. "Furthermore, without another EU Heads of State meeting until mid-December there is growing concern that we will not see any progress in the eurozone until then."

Earlier in Asia, stock indexes fared slightly better. Japan's Nikkei 225 index eked out a marginal gain to close at 9,014.25 a day after the country's currency fell to a three-month low against the dollar.

A weak yen helps Japan's mammoth export sector by raising the value of company profits repatriated from abroad. Still, grim export data _ which Monday showed a 10 percent drop in exports for September compared with a year earlier _ kept advances in check.

South Korea's Kospi declined 0.8 percent to 1,926.81 but mainland Chinese stocks lost ground, with the Shanghai Composite Index down 0.9 percent to 2,114.45. The Shenzhen Composite Index lost 1.4 percent to 869.96.

Hong Kong markets were closed for a public holiday.

In the currency markets, the euro was down 0.3 percent at $1.3033 _ the euro often suffers when investor appetite for taking on risk is diminished.

As do oil prices _ benchmark oil for December delivery was down 14 cents to $88.51 per barrel in electronic trading on the New York Mercantile Exchange.