European stocks weaken on eve of US election

European equities lost ground Monday as cautious trading prevailed on the eve of the US presidential election, dealers said.

London's FTSE 100 index of top companies slid 0.50 percent to close at 5,839.06 points.

In Frankfurt, the DAX 30 skidded 0.51 percent to end at 7,326.47 points, while in Paris the CAC 40 dropped 1.26 percent to 3,448.5 points.

Eyes are on the world's two biggest economies this week, as US President Barack Obama battles for re-election on Tuesday in a tight race against Republican challenger Mitt Romney and Beijing is expected to anoint its successor to President Hu Jintao.

"The US election remains perhaps the sole focus of attention, but I suspect that, whoever wins on Tuesday, we will wake up on Wednesday in a world where little has changed," said analyst Chris Beauchamp at trading group IG.

"The US still faces a major challenge ahead in the form of the looming fiscal cliff, and whoever is the next president will need all their political acumen to resolve the problem.

"Of greater concern should be the Chinese leadership handover, as it seems the more conservative elements are poised to regain control, which could exacerbate tensions in East Asia. As a result, investors remain firmly risk averse," he added.

US stocks opened mostly lower, with the Dow Jones Industrial Average down 0.16 percent to 13,072.69 points after five minutes of trade.

The broad-based S&P 500 fell 0.24 percent to 1,410.82 points, while the Nasdaq Composite gained 0.11 percent to 2,985.55 points.

"The US equity markets are moving to the downside... with tomorrow's US presidential election draining conviction on the Street, along with festering Greek bailout uncertainty," Charles Schwab & Co. analysts said.

In foreign exchange deals on Monday, the euro sank to $1.2767 -- hitting the lowest level since September 11 -- as investors sought the safety of the dollar amid uncertainty over the US election.

The shared eurozone unit later stood at $1.2790, down from $1.2835 late in New York on Friday.

"With the US elections tomorrow, I expect to see further downside pressure on the pair as traders favour the safe-haven dollar," cautioned Alpari analyst Craig Erlam.

"The race for the White House has been extremely close for months now and with just one day to go until people in the US go to the polls, traders are likely to remain risk averse."

Gold prices fell to $1.672.75 an ounce on the London Bullion Market, touching a low last seen on August 31, before pulling back to $1,679. That compared with $1,685 on Friday.

A stronger greenback makes dollar-priced commodities like gold more expensive for buyers using weaker currencies, denting demand.

In company news on Monday, HSBC saw its share price slide 1.34 percent to 617.9 pence in London, after the British banking giant reported plunging net profits.

HSBC announced that third-quarter earnings slumped after it took $1.15 billion (898 million euros) in extra charges for a money-laundering scandal in the US and insurance mis-selling claims in Britain.

Profits after tax tumbled by more than half to $2.498 billion in the third quarter or three months to September, compared with $5.222 billion a year earlier, HSBC said in a results statement.

Asian markets closed mostly down on Monday ahead of the US vote and the start of China's leadership transition.

Hong Kong fell 0.47, Tokyo dropped 0.48 percent, Seoul lost 0.55 percent and Shanghai shed 0.14 percent. Sydney finished 0.31-percent higher.

Traders were given a bright lead after the US Labor Department on Friday said the American economy created 171,000 jobs in October, far more than the expected 125,000.