Setback in US fiscal talks rattles shares, euro

NEW YORK: Global stock markets fell yesterday, pushed lower by a drop on Wall Street, and the euro and oil prices also slipped as a new setback in talks to avert a US fiscal crisis and weak data out of Europe put investors on edge.
A proposal from Republican leader John Boehner to avoid the so-called fiscal cliff failed to get support from his party late Thursday, casting fresh uncertainty over negotiations to avoid automatic tax hikes and spending cuts in January that could push the US economy back into recession.
The three major US equity indices were off about 1 percent, with the markets also weighed down by a poor reading of consumer confidence.
Thomson Reuters/University of Michigan Surveys of Consumers' final December consumer sentiment index fell to 72.9 from 74.5 in a preliminary report. Economists in a Reuters survey expected a final December reading of 74.7.
"The markets are becoming extremely nervous as time is running out for any compromise solution" in US fiscal negotiations, said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
"The greatest fear among investors is that the sudden shock to US aggregate demand caused by the automatic sequestration of government spending and the simultaneous hike in taxes could have a chilling effect on global growth."
The Dow Jones Industrial Average was down 134.67 points, or 1.01 percent, at 13,177.05. The Standard & Poor's 500 Index was down 15.29 points, or 1.06 percent, at 1,428.40. The Nasdaq Composite Index was down 35.47 points, or 1.16 percent, at 3,014.92.
Adding to anxiety were weaker-than-expected data from key corners of Europe, as German consumer morale dropped to its lowest in more than a year, Britain revised growth figures lower
and Sweden slashed its economic forecasts.
The euro fell 0.51 percent to $1.3175. The combined worries prompted widespread selling in most major stock markets and led investors to safe-haven assets.
The dollar and yen and US and German Government bonds all rose as declines on equity markets in London, Paris and Frankfurt compounded tumbles in Asia. MSCI's all-country global equity index fell 0.91 percent to 339.48.
The FTSEurofirst 300 of leading European shares fell 0.39 percent to 1138.30.
At a news conference, Boehner said it was up to President Barack Obama and fellow Democrats in Congress to reach a solution on the fiscal cliff.
Bickering US politicians have only 10 days left to resolve their differences. Most observers are still assuming the two sides will avert a fiscal disaster but tensions are likely to intensify over the normally quiet holiday period as the deadline looms.
"The markets are likely to interpret this as signaling even tougher negotiations in coming days," Mohamed El-Erian, chief executive of bond giant PIMCO, told Reuters.
Oil was also caught up in the US disappointment. Brent crude oil fell $1.17 to $109.03 per barrel, while US oil futures fell $1.61 to $88.52.
The benchmark 10-year US Treasury note rose 14/32 in price to yield 1.751 percent.
Asian markets mostly fell yesterday. Tokyo fell 0.99 percent, or 99.27 points to 9,940.06, Seoul shed 0.95 percent, or 19.08 points, to 1,980.42 and Sydney was 0.23 percent lower, losing 10.5 points to end at 4,623.6.
Hong Kong slid 0.68 percent, fell 153.49 points to close at 22,506.29, while Shanghai lost 0.69 p Taipei fell 0.99 percent, or 75.53 points, to 7,519.93.
Taiwan Semiconductor Manufacturing Co. was 1.25 percent lower at Tw$94.8 while leading smartphone maker HTC rose 1.63 percent to Tw$280.0.
Manila closed 0.45 percent higher, adding 26.20 points to 5,823.94. Metropolitan Bank and Trust rose 2.06 percent to 101.70 pesos and Philippine Long Distance Telephone gained 1.18 percent to 2,570 pesos.
Wellington fell 0.51 percent, or 20.71 points, to 4,054.74.
Air New Zealand was down 0.78 percent at NZ$1.28, Fletcher Building shed 2.37 percent to NZ$8.25 and Telecom eased 2.59 percent to NZ$2.26.
Singapore closed up 0.54 percent, or 16.95 points, at 3,175.52.
Singapore Telecom rose 0.60 percent to Sg$3.37 and DBS Group gained 0.54 percent to Sg$14.99.
Jakarta ended down 21.04 points, or 0.49 percent, at 4,254.82.
Kuala Lumpur shares gained 4.96 points, or 0.30 percent, to close at 1,670.60.
Mumbai fell 1.09 percent or 211.92 points at 19,242.0 points.