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European Shares Get Earnings Boost into US Election

European equities were lifted by a clutch of strong earnings reports on Tuesday, although volumes were subdued as many preferred to wait for the outcome of the neck-and-neck U.S. Presidential campaign.

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Tuesday's polls will determine whether incumbent Barack Obama or Republican challenger Mitt Romney are in charge of resolving the "fiscal cliff" of multi-billion dollar spending cuts and tax increases, which threatens to plunge the United States back into recession next year.

The fate of the U.S. economy has become increasingly key for European companies, such as Adecco, as the euro zone crisis crushes domestic growth. Shares in the staffing group added 3.2 percent after stronger sales in North America compensated for a continuing slowdown in Europe, enabling it to beat expectations on third quarter profit.

"If you look at pockets of strength within Europe it's companies that are exposed to the U.S. and to Asia," said Stephen Walker, head of equities research and market strategy at Ashcourt Rowan.

Earnings Boost Sentiment

The gains in Adecco, coupled with a strong performance in the insurance sector after an outlook upgrade by Hannover Re helped the FTSEurofirst 300 Index to provisionally close 0.5 percent higher at 1,113.83 points.

The EuroSTOXX 50 added 0.7 percent to 2,534.86 points in light volumes, at just 48 percent of its 90-day daily average.

Another strong performer was U.K. consumer bellwether Marks & Spencer, which reported falling first-half profit. However the figures were broadly in-line with expectations and shares closed up over 2 percent.

Meanwhile,Associated British Foods, which owns retailer Primark, reported a 17 percent increase in its full-year profit.

The auto sector was the biggest loser on European indexes weighed down by BMW. The German car maker reported third quarter earnings that were better-than-expected, however many analysts were forecasting a higher margin on earnings before interest and taxes.

France Announces Reforms

In Europe, France announced new reforms aimed at boosting competitiveness, after a government-commissioned report from ex-EADS Chief Executive Louis Gallois called for 30 billion euros ($38.54 billion) to be cut from payroll taxes and labor laws to be loosened.

Greece was facing renewed strife as its two biggest unions kicked off a two-day strike to protest against austerity measures on Tuesday morning. The government is due to vote on further austerity measures on Wednesday in order to receive more aid from the International Monetary Fund and the European Union.

A raft of economic data for the euro zone was released on Tuesday. Services PMI for Spain showed a contraction for the sixteenth consecutive month. In Italy, the Services PMI contracted by a smaller than expected amount, but it was still the seventeenth month of contraction for the economy.

Services PMI for Germany and France also both showed a decrease. For the euro zone as a whole, composite PMI fell to 45.7 for October, from a figure of 46.1 in September.