European stocks flat ahead of key US earnings

LONDON — European stock markets traded in a tight range Monday despite big losses in Asia as investors held back from staking out positions ahead of a raft of U.S. earnings this week.

The FTSE 100 index of leading British shares was up 2.54 points, or 0.1 percent, at 4,129.71 while Germany’s DAX rose 3.14 points, or 0.1 percent, to 4,579.45. The CAC-40 in France was a minuscule 0.91 point lower at 2,982.19.

The flat performance in Europe was unexpected following heavy losses in Asia earlier. Every major across Asia market dropped, with Japan’s index racking up its ninth straight loss as the country’s embattled prime minister moved to dissolve parliament and call general elections for next month.

Keith Bowman, an equities strategist at Hargreaves Lansdown stockbrokers in London, said there’s a lot of uncertainty ahead of some key U.S. second-quarter earnings this week.

“There are some nerves and positioning ahead of key second quarter earnings in the U.S.,” he said.

Investors will be looking for clues about whether companies have already seen the worst of the recession or whether they are still struggling in the first synchronized global economic downturn since the Second World War.

So far, the few earnings statements that have been released have been less than upbeat. Much of the focus this week will be on the U.S. banks and how quickly they expect to pay back government bailout funds.

Goldman Sachs Group Inc.’s is the first major U.S. financial institution to report on Tuesday, followed by JPMorgan Chase & Co. on Thursday, and Bank of American Corp. and Citigroup Inc. on Friday.

“There is no point in having a manicure at the start of this week because you’ll be biting those nails by the end once the U.S. bank earnings are hitting the screens,” said David Keeble, an analyst at Calyon Credit Agricole.

It’s not just the banks in focus this week. The world’s biggest chip maker Intel Corp. will also likely generate headlines Tuesday when it reports too, as will search engine firm Google Inc. on Thursday.

With so many key earnings report to come from Tuesday onwards, Wall Street was set for a fairly muted start to the week later Monday. Dow futures were down 21 points, or 0.3 percent, at 8,064 while the broader Standard & Poor’s 500 futures fell 3 points, or 0.3 percent, to 871.30. On Friday, U.S. stocks ended down after a downbeat consumer confidence survey.

Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated.

But disappointing economic news over the last few weeks, culminating in last week’s worse than expected U.S. jobs report for June, has altered the mood prevailing among investors that a significant rebound in the U.S. was a possibility. Since peaking in early June, the S&P index and the Dow Jones industrial average have dropped around 7 percent.

Earlier in Asia, Japan’s Nikkei 225 stock average tumbled 236.95 points, or 2.6 percent, to 9,050.33 as Prime Minister Taro Aso told ruling party leaders Monday he will dissolve parliament and hold general elections next month, following a crushing defeat for his party in Tokyo municipal polls considered a barometer of voter sentiment.

“Japan will essentially be without a government during that time,” said Masayoshi Okamoto, head of dealing at Jujiya Securities in Tokyo. “So investors are trimming their holdings as a precaution against the political vacuum. If something happens, the country may not be able to immediately respond.”

Meanwhile, Hong Kong’s Hang Seng shed 453.79, or 2.6 percent, to 17254.63, while South Korea’s Kospi dived 3.5 percent to 1,378.12.

Elsewhere, Taiwan’s market dropped 3.5 percent as investors worried that a partial free trade agreement with mainland China would be delayed until next year and Australia’s index lost 1.5 percent. Shanghai’s main stock measure lost 1.1 percent.

Oil prices fell again with benchmark crude for August delivery down 27 cents to $59.62 a barrel.

The dollar fell 0.3 percent to 92.19 yen, while the euro edged up 0.1 percent to $1.3961.

AP Business Writer Jeremiah Marquez in Hong Kong and AP Writer Tomoko A. Hosaka in Tokyo contributed to this report.