LONDON – World stock markets fell modestly Wednesday after soft U.S. housing data reined in some of the optimism generated by a raft of better-than-expected earnings.

In Europe, the FTSE 100 index of leading British shares was down 3.91 points, or 0.1 percent, at 5,239.49 while Germany's DAX fell 11.93 points, or 0.2 percent, at 5,799.84. The CAC-40 in France was 20.66 points, or 0.5 percent, lower at 3,850.79.

Earlier in Asia, Japan's Nikkei 225 stock average slipped 3.45 points, or less than 0.1 percent, to 10,333.39, while Hong Kong's Hang Seng dropped 66.85 points, or 0.3 percent, to 22,318.11.

Wednesday's drop echoed the performance on Wall Street the previous day, when investor sentiment was weighed down by soft U.S. housing data. Official data showed applications for building permits fell by the largest amount in five months, reinforcing worries that the fledgling housing revival could be derailed by rising unemployment and the expiration on Nov. 30 of the government's $8,000 tax credit for first-time homebuyers.

The rest of the session may well hinge on how investors respond to the next batch of U.S. third-quarter company earnings, in particular those from Morgan Stanley, Wells Fargo & Co. and Boeing Co.

"U.S. corporate earnings will set the tone of the market again today," said Arifa Sheikh-Usmani, an equity trader at Spreadex.

Stock futures pointed to another weak session for Wall Street. Dow futures were down 27 points, or 0.3 percent, at 9,973 while the broader Standard & Poor's 500 futures fell 3.2 points, or 0.3 percent, at 1,086.20.

Analysts at Calyon Credit Agricole noted that the markets may be too optimistic in their assessments and that as a result even good results are greeted with a poor reaction. However, they said that following Tuesday's declines on Wall Street, they may be in a better position to respond positively to any forecast-busting earnings.

So far, a large majority of U.S. companies have reported better-than-expected earnings and painted a fairly rosy picture for the coming months, helping many of the world's major indexes push back above the levels they were at over a a year ago before Lehman Brothers collapsed.

The rally in stocks since March's lows have been predicated on hopes that the global economic recovery will be quicker and more substantial than valuations were implying.

Many now think that the valuations could be too optimistic, especially if governments and central banks think their job is done and start withdrawing some of the stimulus measures they have enacted over the last year or so.

In Britain, there was interest in the minutes to the last rate-setting meeting of the Bank of England to see if there was any support for additional asset purchases from the central bank.

Though few clues were provided, the pound shot higher in currency markets as investors reined in their expectations that the Bank would be requesting a further 25 billion pounds to spend buying up financial assets from banks. At the moment it is completing a 175 billion pound asset purchase facility.

Neil Mackinnon, global macro strategist at VTB Capital in London, said the minutes suggested that further purchases were unlikely for now given references in the minutes of evidence that bank lending is making a tentative recovery.

The pound was up 1.1 percent at $1.6564 following the release of the minutes.

Other currency movements were fairly subdued. The euro was flat at $1.4937 while the dollar rose 0.2 percent against the Japanese yen to 90.93 yen.

In Asia, South Korea's Kospi retreated 0.3 percent to 1,653.86, while Australia's index slipped 0.2 percent, Singapore's market was down 0.3 percent and China's Shanghai benchmark fell 0.5 percent.

Oil prices fell for a second day as investors eyed a bigger-than-expected U.S. crude inventory increase and weak economic data. Benchmark crude for December delivery fell 77 cents to $78.35 a barrel. The contract slid 84 cents to settle at $79.12 on Tuesday.

____

AP Business Writer Stephen Wright in Bangkok contributed to this report.