* U.S., European shares fall on investor caution
* Dollar index touches 2-month highs on safety bids
* U.S. presidential race tight before Tuesday vote
* Eyes also on Chinese leadership, euro zone debt crisis
By Richard Leong
NEW YORK, Nov 5 World stocks fell and the dollar
firmed on Monday as investors moved to the sidelines or favored
low-risk assets before Americans choose their president, China
starts a leadership transition and Greece faces a fraught vote
to secure fresh rescue funds.
Investors are nervous over whether the world's biggest
economy will avert a shock as Washington will contend with an
automatic $600 billion in spending cuts and tax hikes at year
end -- known as the "fiscal cliff" -- after the presidential
World leaders at the G20 summit this weekend in Mexico City
pressed the United States to act decisively on the tax and
"People are pausing ahead of the election and what that
means for the fiscal cliff," said Jim Paulsen, chief investment
officer at Wells Capital Management in Minneapolis.
Opinion polls show the race between President Barack Obama
and Republican challenger Mitt Romney remains neck-and-neck at
the start of the last day of campaigning, and the uncertainty
over the outcome left financial markets jittery.
Safe-haven bids pushed the U.S. dollar up 0.2 percent to
two-month highs against a basket of major currencies and
German two-year government bond yields dropped below
zero for the first time in two months on safe-haven demand.
In late morning trading, the Dow Jones industrial average
was down 8.56 points, or 0.07 percent, at 13,084.60. The
Standard & Poor's 500 Index was down 0.45 points, or 0.03
percent, at 1,413.75. The Nasdaq Composite Index was up
8.92 points, or 0.30 percent, at 2,991.05.
European shares were down 0.5 percent, having ended
the previous week at a two-week high.
The MSCI world shares index was 0.5 percent
lower as Tokyo's Nikkei index closed 0.5 percent weaker
following Friday's Wall Street sell-off.
Benchmark U.S. 10-year Treasury notes were up
10/32 in price, yielding 1.6823 percent, down 3 basis points
from late on Fr iday.
In commodity markets, Brent crude oil turned higher,
erasing early losses. December Brent futures last traded up 26
cents at $105.95 a barrel after they were bogged down earlier by
a strong dollar and a drop in demand in the wake of Sandy, the
deadly storm that pummeled the U.S. Northeast a week ago.
Sandy disrupted the distribution of gasoline and left
millions without power in the region.
In line with the broader market caution, gold gained about
0.4 percent at $1,683.10 after Friday's 2 percent plunge.
BEYOND U.S. ELECTION
While monitoring on the outcome of the tight race for the
White House, investors were mindful of the leadership transition
in China and developments in the euro zone debt crisis and their
impact on the global economy.
It was expected that Greek Prime Minister Antonis Samaras'
coalition will muster enough support on Wednesday to win a vote
on structural reforms and a follow-up vote on Sunday on an
austerity budget for 2013. These fiscal reforms are critical for
the debt-laden nation to receive more financial aid from
"The concern remains the euro debt crisis and the continuing
problems regarding Greece," said Matthew Lifson, senior trader
and analyst at Cambridge Mercantile Group in Princeton, New
On Thursday, China's ruling Communist party will begin the
18th congress in its history with the culmination a week later
in the expected selection of Xi Jinping to succeed President Hu