Caution before U.S. vote keeps Asian shares steady

TOKYO (Reuters) - Asian shares and the dollar steadied on Tuesday, with investors' reluctant to place new bets amid uncertainty over the outcome of a tight U.S. presidential election and renewed doubts over Greece's ability to push through severe fiscal reforms.

Risk-aversion underpinned the dollar near a two-month high against a basket of major currencies and bound most asset markets within tight trading ranges, with oil, gold and the euro all barely budged.

U.S. stock futures indicated a slightly firmer open on Wall Street, while financial bookmakers called London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 to open up 0.1-0.3 percent, after falling in the previous session.

U.S. President Barack Obama and Republican challenger Mitt Romney are statistically tied, but the Democrat has a slight edge in some of the pivotal states where the election will be decided, according to Reuters/Ipsos polling.

If the election is so close that the result is delayed it could roil financial markets, as happened in the protracted 2000 Bush versus Gore battle that ended up in the Supreme Court.

"That is a situation global markets fear most and such uncertainty will have a big negative impact," said Cameron Peacock, market strategist at IG in Melbourne. "The best possible outcome would be for a clear and unqualified victor to emerge."

Meanwhile, the world's leading economies gave themselves a bit more wiggle room on Monday to meet targets for cutting budget deficits rather than risk worsening a slowdown in many countries, chief among them the United States.

The MSCI index of Asia-Pacific shares outside Japan rose 0.4 percent, pulled higher by a 0.2 percent rise in Australian shares and a 1.1 percent gain for South Korean shares that outweighed weakness in most other Asian equities.

Hong Kong's Hang Seng Index fell 0.4 percent, dragged down by a drop in the index heavyweight HSBC Holdings. Japan's Nikkei average also fell 0.4 percent.

FISCAL CLIFF, GREEK VOTE

Whichever candidate prevails in the U.S. election, the prospect of a less than decisive win and lack of a clear majority in Congress raises the chances of messy negotiations over the "fiscal cliff" - nearly $600 billion worth of spending cuts and tax increases that risk pushing the economy into deep recession - analysts say.

In addition to the U.S. election, investors need to be mindful of the potential for renewed stress in Europe and China's political leadership transition, Morgan Stanley said.

"Markets are currently beset by opposing (positive and negative) factors, with the weight of upcoming risk events now turning us decidedly more cautious ... Risks of a messy negotiation around the fiscal cliff are likely to increase volatility at minimum," it said in a research note.

Greece faces protests as the government is set to propose its latest belt-tightening measures for a vote by lawmakers on Wednesday, which is needed to secure more aid and stave off bankruptcy.

But a bailout deal to keep Greece afloat is unlikely to be struck next week when euro zone finance ministers meet in Brussels, a senior EU official said on Monday, as the euro zone still had to find a formula to make Greek debt sustainable and several countries, including Germany, had to discuss the matter with their parliaments.

"The market ought to be focusing more on the imminent situation facing Greece, even more than the U.S. presidential election," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.

The euro eased a touch to $1.2789, staying near the previous day's low of $1.2767 set on trading platform EBS, the single currency's lowest level in about two months.

The dollar was also off a fraction against a basket of major currencies, but remained close to the two-month high scaled on Monday.

The Australian dollar rallied 0.6 percent to $1.0436, a five-week high, after the Reserve Bank of Australia left interest rates unchanged at its policy meeting.

Greek uncertainty bolstered safe-haven bids for German two-year government bond, sending the yields below zero for the first time in two months on Monday, while benchmark 10-year U.S. Treasury yields fell to 1.684 percent.

U.S. crude futures were almost unchanged at $85.67 a barrel and Brent crude was also flat around $107.70. Gold was little changed around $1,656 an ounce.

Asian credit markets were subdued, leaving the spread on the iTraxx Asia ex-Japan investment-grade index little changed from Monday.

(Additional reporting by Dominic Lau and Lisa Twaronite in Tokyo and Alex Richardson in Singapore; Editing by Kim Coghill)

Source: http://news.yahoo.com/caution-u-vote-keeps-asian-shares-steady-070545005--finance.html

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