LONDON -- Renewed concerns over Greece combined with uncertainty over the outcome of the U.S. presidential election to weigh on investors Monday.
For the past couple of weeks, developments in the U.S. have been driving the markets. As well as monitoring the battle for the White House, investors have had to contend with Superstorm Sandy, which battered the East Coast and brought trading to a halt for two days on Wall Street.
Tuesday's election appears to be going down to the wire, though the most opinion polls indicate that President Barack Obama may have the edge over Mitt Romney in the crucial swing states.
"With the race so close, investors are understandably risk averse today," said James Hughes, chief market analyst at Alpari.
Uncertainty over the outcome has weighed on market at the start of the week.
In Europe, the FTSE 100 index of leading British shares was down 0.6 percent at 5,827 while Germany's DAX fell 0.7 percent to 7,312. The CAC-40 in France was 0.9 percent lower at 3,460.
Wall Street was poised for a flat opening, with both Dow futures and the broader S&P 500 futures unchanged.
However, it could be developments in Greece that may have more of a bearing on markets in the last months of the year. Gary Jenkins, managing director of Swordfish Research, points out that the U.S. elections could take a back seat to events in Athens.
"From a European perspective, it is probably not the most important vote of the week when it comes to the potential to create major market volatility in the short or even medium term," he said.
Two votes in Parliament this week could well determine if the cash-strapped country stays in the euro.
On Wednesday, Greek lawmakers are expected to vote on a (euro) 13.5 billion ($17.3 billion) austerity package that is required by international creditors for the release of the next batch of the country's bailout funds. Without the cash, Greece faces bankruptcy.
If, and when, the package of spending cuts and tax increases is passed, lawmakers will have to approve the 2013 budget. That vote is penciled in for Sunday.
The prevailing view in the markets is that both votes will get passed but the margin of error is slim, given that a junior partner in the wobbly coalition government has said it will vote against the austerity bill if certain labor reforms are not extracted.
Worries over Greece have increasingly weighed on the euro over the past few sessions. Europe's single currency was down a further 0.3 percent Monday at $1.2794.
Earlier in Asia, Japan's Nikkei 225 index fell 0.5 percent to close at 9,007.44. Hong Kong's Hang Seng lost 0.5 percent to 22,006.40. South Korea's Kospi shed 0.6 percent to 1,908.22.
Mainland Chinese shares lost ground after four straight days of gains. The Shanghai Composite Index lost 0.1 percent to 2,114.03 and the Shenzhen Composite Index lost 0.5 percent to 858.60.
A key political event also takes place this week in China, the world's No. 2 economy. Thursday marks the opening of the Communist Party congress -- the once-in-a-decade forum used to name China's top leadership.
Tom Kaan, head of equity sales at Louis Capital Markets in Hong Kong, said it would be a "cause of concern" if China's new leaders do not take quick action to boost employment, particularly among the ranks of middle-income earners who have lost jobs amid the country's economic slowdown.
"Unemployment is one of the biggest concerns which nobody seems to be focusing on," he said. Investors are also hoping to see progress in the deregulation of China's financial markets.
Oil prices drifted lower alongside equities, with benchmark oil for December delivery down 25 cents to $84.61 per barrel in electronic trading on the New York Mercantile Exchange.