"It's really characterised by uncertainty," said Standard Chartered Treasury Economist Mike Moran. "The longer this is drawn out, the worse it may become for global sentiment." The single European currency fell back to 0.8625 dollars in early trading from 0.8645 late Asia trade. The euro bought 92.88 yen from 93.24 in Asia.

The dollar weakened against the Japanese unit to 107.69 yen from 107.87 yen. European bonds prices meanwhile gained ground as investors ploughed their funds into safe haven assets, pushing the yield on the German two-year bond down to 4.99 per cent - it's lowest since October 13. Ten-year US bonds continued to benefit, with the yield on the 10-year note at a seven-day low of 5.78 per cent. "Ironically, we may see safe haven flows back to the United States, perhaps into Treasury bills," Moran said. The European stock markets were bracing themsleves for a another bumpy session after the US tech-rich shed a massive 5.3 per cent to a 12-month low Friday, while the Dow Jones Industrial Average was down two percent at the closing bell.

The Asian markets were also sucked down in Wall Street's wake: the Hang Seng tumbled 3.7 per cent in Hong Kong on Monday, while the Nikkei-225 dropped 2.2 percent in Tokyo. The US electoral dispute was having "a dampening impact for the Asian and European bourses," Moran said.

The markets were waiting to see if the campaign managers of Republican presidential nominee George W. Bush would succeed in their efforts to thwart a bid by the aides of Democratic rival Al Gore to force a recount in the key battleground of Florida. Canadian Imperial Bank of Commerce economist Audrey Childe-Freeman said that the market "remains nervous faced with the uncertaintly of the US elections."

AFP