U.S. stocks fell Thursday despite a large drop in weekly jobless claims as investors moved cautiously before the Federal Reserve's key meeting next week. 3M was the Dow blue chip index's worst performer, sliding 6.3% after its earnings report disappointed investors. The consumer and industrial manufacturer's third-quarter profit jumped 16% on higher sales at a bulk of its operating divisions. But 3M narrowed its 2010 profit target due to the impact of acquisitions made in recent months.

Also weighing on the Dow were Caterpillar, which fell 1.2% and Verizon Communications, off 0.6%. Meanwhile, Exxon Mobil was one of the Dow's best performers, gaining 1.1% after its third quarter earnings rose a bigger than expected 55%. The oil giant benefited from stronger commodities prices and refining margins in the first full quarter that included its June acquisition of natural-gas producer XTO Energy. The Standard & Poor's 500 stock index edged lower as the industrials, financials and technology sectors led the decline. Thursday's losses also occurred despite a better than expected reading on the labor market.

European market

European stocks closed higher, boosted by a positive reaction to strong third quarter earnings. The dollar lost ground against major currencies while gold and oil prices rose. Investors focused on the Federal Reserve's expected stimulus program aimed at kick starting the U.S. economy, which is expected to be announced Wednesday. The program is putting pressure on the dollar since it will, in essence, put more dollars into circulation. Away from currencies, much of the day's activity flowed from a barrage of earnings reports, which remained mostly supportive.

The pan-European Stoxx 600 Index closed up 0.4% at 265.9. The UK's FTSE 100 rose 0.6% to 5677.89, France's CAC-40 added 0.5% at 3834.84, and Germany's DAX gained 0.4% to .6595.28. In the U.S., the Dow Jones Industrial Average was 0.2% lower at 11103.77 at midday. In Paris, shares of France Telecom gained 3.1%, after the company raised its full year revenue target as market trends continued to improve over the third quarter, and the company confirmed its cash flow target for this year and next. In London, Royal Dutch Shell shares advanced 0.5% after the company beat analysts' forecasts to post an 88% rise in adjusted profit for the third quarter, driven by higher output and greater demand for refined products and chemicals.

In economic news, the euro-zone economic sentiment indicator surprised to the upside, rising to 104.1 versus expectations for a flat reading around 103.2, which helped to further push forward the major European indexes. Friday, the U.K. will publish September mortgage approvals and in the euro zone unemployment data and inflation data are due. In major market action: Dassault Systemes SA gained nearly 8% as the software firm raised its full year earnings outlook and reported sharp gains in quarterly revenue and profit. Downward pressure came from auto maker Renault SA. The auto company's shares fell 2.6% after Societe Generale cut the firm's rating to hold from buy, saying the European market could weaken in the first half of next year.

In London, shares of ARM Holdings PLC advanced 3.2%. RBC Capital Markets lifted its target price to 390 pence from 360 pence, saying the group continues to gain market share, according to Dow Jones Newswires. Shell's strong earnings drove other oil companies higher. BP PLC gained 0.9% and France's Total SA added 1.2%. Shares of Italian oil major ENI SpA advanced 2.8% in Milan after the firm reported a 48% increase in third quarter profit. Leading the decliners in London was pharmaceutical group AstraZeneca. Its shares fell 3.3% after the group announced that third-quarter net profit fell 27% on a legal charge and lack of swine flu drug sales. Also in the drug sector, shares of Sanofi-Aventis rose 0.3% in Paris after the firm said profit and sales increased in the third quarter.

Volkswagen AG rose 2.8% after Nomura raised its price target on the group, saying the current year should end on an upbeat note and 2011 looks very promising. Shares of Deutsche Lufthansa AG rose 0.8% after the group raised its earnings outlook for 2010 and tripled its operating profit for the first nine months of the year, citing good demand in passenger and freight traffic. In Spain, shares of Santander, Spain's biggest bank, dropped 0.4%. Santander's third quarter net profit fell, owing to one off provisions. The bank also warned that it won't reach this year's profit target.

Asian market

Asian markets ended mixed Thursday, though shares of Chinese banks rose in Hong Kong and the mainland on the back of robust earnings for Agricultural Bank of China and Bank of China. Trading volumes were modest in several regional markets as investors looked to the U.S. Federal Reserve's meeting next week for cues. There was now growing anxiety among investors that the extent of monetary easing by the Fed could be smaller than previously anticipated. Japan's Nikkei Stock Average fell 0.2%, South Korea's Kospi slid 0.1%, China's Shanghai Composite gave up 0.2% and India's Sensex fell 0.3%.

Among the markets that gained, Australia's S&P/ASX 200 and Taiwan's Taiex added 0.8% each, Hong Kong's Hang Seng Index ended 0.2% higher. Chinese bank shares were higher in Hong Kong and China after Agbank reported that third quarter net profit rose 30% from a year earlier to CNY24.31 billion because of higher interest income, while Bank of China said its third-quarter net profit rose 29% to a record CNY27.22 billion. Agbank was up 0.7% in Hong Kong, 1.4% higher in Shanghai while Bank of China's H-shares rose 1.8% and its A-shares gained 0.9%. Bank of Communications was up 1.8% and 0.5% in Hong Kong and China respectively and shares of China Construction Bank gained 1.1% and 0.4% in both markets respectively.

Weakness in resource related shares offset gains in firms such as Canon Inc and Central Japan Railway after they posted encouraging results. Canon jumped 3.7% after reporting upbeat third quarter earnings and upgraded its full year net profit forecast. Central Japan Railway added 3.8% after announcing solid April-September earnings featuring a rise in net profit by 27% on-year. The company also revised up its full year earnings outlook. In Seoul, the Korean stock market was supported by technology stocks with above view third quarter results from Hynix Semiconductor and LG Electronics. While Hynix itself erased early gains to finish 0.2% lower, shares of Samsung Electronics climbed 1.5% and LG Electronics advanced 1.0%.

Among other regional benchmarks, New Zealand's NZX-50 advanced 0.3% and Philippine shares finished 0.6% lower. Singapore's Straits Times Index rose 0.2% and Thailand's SET Index gained 0.3%. Earlier in the day, the Bank of Japan left its policy interest rate unchanged, as widely expected, but cut its economic growth forecast for the current financial year through March 2011 to 2.1% from the 2.6% it forecast three months ago. The BOJ also moved forward its next policy meeting to Nov. 4-5, immediately following the Fed's meeting. The BOJ meeting was previously scheduled for Nov. 15-16.

Base metals on the London Metal Exchange ended mostly higher in a volatile session dominated by the dollar's movements. The metals struggled in the end to match the EUR/USD's rise, running into selling from market participants worried the metals are due for a correction. Copper ended 0.5% higher at $8,299 a metric ton. Zinc and lead were unable to overcome early losses and ended 0.7% and 1.5% lower.

Oil prices rose on Thursday as traders eyed the weak dollar and a surprise drop in weekly job claims which bolstered confidence in the US economic recovery. New York's main contract, light sweet crude for delivery in December, rose 24 cents to $82.18 a barrel. Brent North Sea crude for December added 36 cents to $83.59. The rise in prices was attributed to a report by the Labor Department showing new claims for US unemployment benefits fell more than expected last week, totaling 434,000.

Gold futures overcame a muted floor-trading start to rally 1.5% on Thursday, trading above $1,340 an ounce and erasing the previous session's losses. Gold for December delivery rose $19.40 to $1,342.10 an ounce on the Comex division of the New York Mercantile Exchange.

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