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Eurpoean stocks steady

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Yen stronger after Japanese upper house elections

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Wall St futures firm before tech earnings blitz

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Euro underpinned as ECB seen on hold

(Updates to European trading, adds analyst quote)

By Wayne Cole and Lucy Raitano

SYDNEY/LONDON, July 21 (Reuters) - European shares held

steady and the yen firmed on Monday, as markets shrugged off the

Japanese ruling coalition's defeat in upper house weekend

elections and turned to focus on this week's U.S. tech earnings

and European Central Bank policy meeting.

Investors were also hoping for some progress in trade talks

ahead of U.S. President Donald Trump's August 1 tariff deadline,

with U.S. Commerce Secretary Howard Lutnick still confident a

deal could be reached with the European Union.

There were reports Trump and Chinese leader Xi Jinping were

closer to arranging a meeting, though likely not until October

at the earliest. European Commission President Ursula von der

Leyen will meet Xi on Thursday.

The pan-European benchmark STOXX 600 index was

flat, while the UK's blue-chip FTSE 100 was up 0.1%. The

euro was 0.1% higher at $1.163950.

Market focus was on weekend news out of Japan, where the

ruling coalition lost control of the upper house in an election

on Sunday, further weakening Prime Minister Shigeru Ishiba's

grip on power as a tariff deadline looms.

Ishiba vowed to stay on, which along with a market holiday,

limited the reaction. The yen was 0.5% firmer at 148.065

to the dollar and up 0.3% against the euro

.

"The loss was within the range of expectations, and actually

the outlook was even more pessimistic," said Nissay Research

Institute chief economist Tsuyoshi Ueno.

"In terms of negotiations with the U.S., it is easy to doubt

whether a government with such a weak foundation is reliable as

a negotiating partner," he added. "For the Bank of Japan, if

there is political instability, it will be difficult to raise

interest rates, and pressure on the yen will continue."

The BOJ still has a bias to raise rates further, but markets

imply little chance of a move until late October.

While the Nikkei was shut, futures traded at 39,885,

up on the cash close of 39,819.

MEGA CAPS KICK OFF

S&P 500 futures edged 0.2% higher, while Nasdaq

futures were up 0.3%. U.S. indexes are already around

record highs in anticipation of more solid quarterly earnings

reports.

Markets are gearing up for a host of big tech company

results this week, including Google owner Alphabet,

Tesla and IBM ( IBM ).

"They are going to be key for sentiment because frankly

there's not a lot else to drive things," said Michael Brown,

senior research strategist at Pepperstone.

"We saw the banks deliver decent results last week, so you'd

certainly be looking for the big tech names to keep up with that

to reinforce the bull case (for equities)," he said.

Investors also expect upbeat news for defence groups RTX

, Lockheed Martin ( LMT ) and General Dynamics ( GD ).

Higher government spending around the globe has seen the S&P 500

aerospace and defence sector rise 30% this year, while defence

stocks in Europe have also hit record highs.

In tech news, Microsoft ( MSFT ) issued an alert about

"active attacks" on server software used by government agencies

and businesses, urging customers to download security updates.

Elsewhere, euro zone government bond yields eased ahead of

euro zone PMI data and the European Central Bank meeting later

this week, at which it is expected to leave rates at 2%

following a string of cuts.

"The press conference will likely keep highlighting

uncertainty and need to wait for tariff negotiations to conclude

before deciding the next step," said analysts at TD Securities

in a note. "Similarly, its 'meeting-by-meeting' language would

be retained in the release."

The euro dipped 0.5% last week, moving off a recent

near-four-year top of $1.1830. The dollar index was a fraction

lower at 98.306.

U.S. Treasury yields fell, leaving the yield on the

benchmark 10-year note down 4.5 basis points at

4.286%. Bonds got a boost late last week after Federal Reserve

Governor Christopher Waller repeated his call for a rate cut

this month.

Most of his colleagues, including Chair Jerome Powell, have

argued a pause is warranted to judge the inflationary impact of

tariffs and markets imply almost no chance of a move in July. A

September cut is put at 61%, rising to 80% for October.

Powell's reticence on rates has drawn the ire of Trump who

threatened to fire the Fed chief, before backing down. The

spectre of a potential political appointee who would seek to

ease policy sharply has investors on edge.

In commodity markets, gold firmed 0.5% to $3,365 an ounce

, with all the recent action in platinum, which

last week hit its highest since August 2014.

Oil prices were caught between the prospect of increased

supply from OPEC+ and the risk European Union sanctions against

Russia over its war in Ukraine could curb its exports.

Brent edged up 0.1% to $69.32 a barrel.

(Editing by Shri Navaratnam, Amanda Cooper and Mark Potter)