Markets flat as all eyes on Slovakia vote

Investors were largely on the sidelines overnight before a crucial vote by lawmakers in Slovakia on increasing the euro zone rescue fund.

In afternoon trading in New York, the Dow Jones Industrial Average edged 0.04 per cent higher, the Standard & Poor's 500 Index rose 0.20 per cent and the Nasdaq Composite Index advanced 0.67 per cent.

The Slovak vote comes as inspectors from the European Union, International Monetary Fund and European Central Bank said an 8 billion euros loan tranche should be paid in early November after approval by euro zone finance ministers and the IMF.

Even so, they warned Greece had made limited progress in meeting the terms of a bailout agreed in May last year. Germany said a decision on whether to make the aid payment was still open.

"It's been the biggest problem on the front burner for the U.S.," Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville, told Reuters. "It looks like it's being diffused."

Earlier today, ECB President Jean-Claude Trichet said the debt crisis threatened the financial system.

"Sovereign stress has moved from smaller economies to some of the larger countries," Trichet told European lawmakers in Brussels today. "The crisis is systemic and must be tackled decisively."

In Europe, the Stoxx 600 Index ended the day with a 0.3 per cent drop. National Bank of Greece SA and EFG Eurobank Ergasias tumbled to record lows. Stocks were mixed across Europe.

"Slovakia is causing some uncertainty," said Witold Bahrke, a Copenhagen-based senior strategist at PFA Pension A/S, told Bloomberg News. "It seems the market is pricing in both a recapitalisation of banks as well as Germany and France having agreed on a larger haircut on Greek debt."

The euro rose ahead of the vote, last up 0.3 per cent to US$1.3678. Against the yen, the euro also strengthened 0.3 per cent. The greenback was 0.11 per cent weaker against a basket of its major counterparts.

There were mixed signals for the outlook on banks elsewhere in the world.

US bank failures through 2015 will drain US$19 billion from the Federal Deposit Insurance fund, the agency said in an update of its reserve ratio projections, Bloomberg reported.

The latest estimated is lower than the US$23 billion forecast amount needed to cover bank failures in 2010, reflecting both the slowing rate of bank shutdowns and the impact of assessment increases imposed by the FDIC to bolster the Deposit Insurance Fund.

Meanwhile, Jim Chanos, the hedge-fund manager who's been betting that Chinese bank stocks will tumble, told Bloomberg today that a rally spurred by government purchases of the shares hadn't changed his bearish outlook.

"The fact that people are even talking about the government stepping in to shore up the banks, when two months ago people thought there was nothing wrong with the Chinese banks, should tell you just how seriously this situation is deteriorating," Chanos said.