Asian shares steady

SINGAPORE (Reuters) -- Asian shares were steady on Monday, trimming earlier U.S.-led falls on strong earnings reports at a number of companies, brightening the outlook for early European stock-market action.

Asian markets opened sharply weaker and the yen gained after the S&P 500 index suffered its worst week in nearly five years on worries that tighter credit would cause takeover activity to slow.

With earnings season in full swing, there were a raft of positive results to support the market, from firms such as Fujifilm Holdings and Fanuc.

Bookmakers in London were expecting major European markets to open slightly lower, but had lifted their calls as Asian stocks rebounded.

Political uncertainty put pressure on Japanese shares after Prime Minister Shinzo Abe's government suffered a crushing defeat in Japan's upper-house elections on Sunday.

As a result, laws will be harder to enact, threatening policy deadlock that may be negative for the stock market, said Norihiro Fujito, general manager at Mitsubishi UFJ Securities' investment research and information division

MSCI's index of Asia-Pacific stocks excluding Japan rose 0.3 percent, while the Nikkei 225 average ended flat after earlier hitting its lowest in four months.

Steel makers took advantage of higher product prices to post sharp gains in quarterly earnings, with Nippon Steel up over 3 percent and JFE Holdings gaining 5 percent after reporting their results.

Key indexes in Hong Kong and Australia both rose about 0.4 percent, while South Korea rose 1.25 percent as technology firms such as Samsung Electronics advanced on their second-half outlook.

Despite the election results, the Japanese yen rose to a three-month high against the euro, hurting exporters such as Canon, before giving back gains as Asian stocks recovered.

"Abe said he won't step down, so the impact on monetary policy is limited," said Masafumi Yamamoto, a currency economist at Nikko Citigroup. "The yen is still very sensitive to the risk-reduction story, and stock markets will be key this week." E-mail to a friend

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