Euro shares dip as fiscal cliff deadline nears

1 of 4. An employee of a foreign exchange trading company looks at monitors as a television set shows Japan's incoming Prime Minister and the leader of Liberal Democratic Party (LDP) Shinzo Abe speaking in Tokyo December 26, 2012. The yen fell to a 20-month low against the dollar on Wednesday, buoying the benchmark Nikkei stock average, as Japan ushers in a new prime minister eager to pursue drastic stimulus steps to drive the country's economy out of deflation.

Credit: Reuters/Yuriko Nakao

By Marc Jones

LONDON | Mon Dec 31, 2012 5:35am EST

LONDON (Reuters) - World stocks were set to end the year up 15 percent but dipped on Monday as U.S. politicians prepared for last-minute talks to avoid a fiscal crunch of spending cuts and tax hikes that could drag down the world economy.

In Washington, the two political parties are set to hold further talks to try and find a way to avoid the $600 billion "fiscal cliff" due to kick in from the start of January.

Senate Majority Leader Harry Reid said the Senate would resume sitting at 11 a.m. Washington time on Monday (1600 GMT), to continue discussions, but there were still significant differences between the two sides.

After a subdued day in Asia, where Japan's Nikkei as well as a number of other indexes had already shut for the year, European stock markets opened fractionally lower.

The pan-European FTSEurofirst 300, which has risen roughly 16 percent this year, was down 0.1 percent as London's FTSE and the Paris CAC 40 both started a shortened trading day in negative territory. German markets were closed.

"Volumes are very depressed and we're going to see a lot of cash off the table and investors are probably going to take profit on cyclical shares," Ishaq Siddiqi, a market strategist at ETX Capital, said.

Siddiqi said a failure to avert the "fiscal cliff" may push the FTSE back to a late November low of 5,800 in the coming sessions.

Midnight on Monday marks the deadline for a U.S. budget deal, though the government can pass legislation in 2013 that retroactively prevents going over the cliff, an option that is viewed as politically easier.

In currency markets, the U.S. dollar last stood at 85.78 yen, having retreated from Friday's high of 86.64 yen, which was the greenback's strongest level versus the Japanese currency since August 2010.

As the year draws to a close, the dollar is up about 11.9 percent against the yen, putting it on track for its biggest percentage gain versus the Japanese currency since 2005.

The euro was down 0.16 percent to $1.3192 on Monday. An agreement on the U.S. budget would be viewed as positive for riskier currencies such as the euro and Australian dollar, while a deadlock is deemed positive for the haven and highly liquid dollar.

Gold was $1,664.10 an ounce by 0810 GMT, up around 6 percent for the year and is on track for a 12th consecutive year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks.

Oil prices slipped on Monday for a third consecutive session on the U.S. budget crisis, with failure to reach a solution seen likely to cause a large drop in fuel consumption.

Brent crude slipped 23 cents to $110.39 a barrel, but is set to post a 2.8 percent year-on-year increase in 2012, up for a fourth consecutive year.

(Additional reporting by Francesco Canepa; Editing by Giles Elgood)

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Setback in fiscal talks rattles shares, euro

1 of 3. A cameraman films rises in share prices at the Tokyo Stock Exchange in Tokyo December 17, 2012.

Credit: Reuters/Yuriko Nakao

By Herbert Lash

NEW YORK | Fri Dec 21, 2012 12:48pm EST

NEW YORK (Reuters) - Global stock markets skidded on Friday while the euro and oil prices also slipped as a new setback in talks to avert a U.S. fiscal crisis and weak data out of Europe put investors on edge.

A proposal from U.S. Speaker of the House of Representatives John Boehner to avoid the "fiscal cliff" failed to get support from his Republican party on Thursday, casting fresh uncertainty over negotiations to avoid automatic tax hikes and spending cuts in January that could push the U.S. economy back into recession.

Wall Street extended losses after Boehner said congressional leaders and President Barack Obama must try to move on from his failed "plan B." He did not outline a clear path forward on negotiations.

"The markets are becoming extremely nervous as time is running out for any compromise solution" in U.S. 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 U.S. aggregate demand caused by the automatic sequestration of government spending and the simultaneous hike in taxes could have a chilling effect on global growth."

MSCI's all-country global equity index .MIWD00000PUS fell 1.03 percent to 339.06.

The Dow Jones industrial average .DJI was down 170.15 points, or 1.28 percent, at 13,141.57. The Standard & Poor's 500 Index .SPX was down 19.12 points, or 1.32 percent, at 1,424.57. The Nasdaq Composite Index .IXIC was down 43.20 points, or 1.42 percent, at 3,007.19.

A poor reading on U.S. consumer confidence added to the gloom.

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.

Weaker-than-expected data from key corners of Europe also weighed. German consumer morale dropped to its lowest in more than a year, Britain revised growth figures lower and Sweden slashed its economic forecasts.

The pan-European FTSEurofirst 300 index .FTEU3 provisionally closed down 0.3 percent at 1,138.90 points, just off a 19-month high of 1,144.15 points set earlier this week.

The euro fell 0.62 percent to $1.3159.

The combined worries prompted widespread selling in most major stock markets and led investors to safe-haven assets.

The dollar and yen and U.S. and German Government bonds all rose as declines on equity markets in London .FTSE, Paris .FCHI and Frankfurt .GDAXI compounded tumbles in Asia.

German Bund futures rose 45 ticks to a settlement close of 144.77, extending Thursday's gains.

Bickering U.S. 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 U.S. disappointment. Brent crude oil fell $1.33 to $108.87 per barrel, while U.S. oil futures

The benchmark 10-year U.S. Treasury note US10YT=RR rose 14/32 in price to yield 1.751 percent.

(Editing by Bernadette Baum and Alden Bentley)

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Shares, euro rise on hopes of U.S. "cliff" deal, BOJ easing

1 of 3. A cameraman films rises in share prices at the Tokyo Stock Exchange in Tokyo December 17, 2012.

Credit: Reuters/Yuriko Nakao

By Alex Richardson

SINGAPORE | Wed Dec 19, 2012 1:15am EST

SINGAPORE (Reuters) - Asian shares and the euro rose to multi-month highs on Wednesday as expectations of more aggressive monetary stimulus from the Bank of Japan and signs of progress in resolving the U.S. "fiscal cliff" budget crisis lifted demand for riskier assets.

European shares were also expected to post gains. However, index futures pointed to a flat opening on Wall Street after the S&P 500 .SPX had its best two-day run in a month on growing confidence a deal can be reached in Washington to avoid a raft of painful spending cuts and tax rises. .N

"What is important, and what is driving the market higher, is that the two parties are now in constructive discussions over specific tax levels and spending programs, and working towards a common middle ground," said Cameron Peacock, a strategist at IG Markets in Melbourne.

Industrial commodities such as oil and copper consolidated earlier gains, while gold recovered some lost ground but remained not far above its lowest in nearly four months as progress in the U.S. budget talks limited its safe-haven appeal.

Financial spreadbetters called London's FTSE 100 .FTSE, Frankfurt's DAX .GDAXI and France's CAC-40 .FHCI indexes to rise 0.2 percent to 0.3 percent. .L .EU

Tokyo's Nikkei share average .N225 closed up 2.4 percent, topping 10,000 points for the first time since April, as the prospect of more monetary stimulus and a cheaper yen boosted financials stocks and shares of exporters. .T

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS gained 0.4 percent, touching its highest level in nearly 17 months, while Australian shares .AXJO and Hong Kong's Hang Seng .HSI also reached 17-month highs. .AX .HK

S&P 500 index futures were flat.

MORE JAPAN EASING EXPECTED

The Bank of Japan started a two-day meeting on Wednesday, under intense political pressure to expand its asset-buying program aggressively to snap the world's third-biggest economy out of its fourth recession since 2000.

Shinzo Abe, who was elected on Sunday as the country's next prime minister, called for the central bank to embark on "unlimited easing" and set an inflation target of 2 percent to beat deflation.

"The market is already in overbought territory, but investors are increasingly being alarmed that there is a risk of not having Japanese stocks in their portfolios," said Hiroichi Nishi, general manager at SMBC Nikko Securities.

The euro rose as far as $1.3256 on electronic trading platform EBS, its highest since the beginning of May, and against the yen it reached 111.73, its highest since late August 2011.

"Unless U.S. fiscal cliff talks take an unexpected turn for the worse, we believe that EUR/USD will meet our 1.3300 year-end target," analysts at BNP Paribas wrote in a note.

Oil held steady, with Brent crude rising about 10 cents to just short of $109 a barrel and U.S. crude little changed below $88.

"There has been some progress in talks and it seems commodity markets have been supported by that, as well as a combination of the recent improvement in manufacturing data in China and the United States," said commodity analyst Stefan Graber of Credit Suisse in Singapore.

Copper was also flat just above $8,020 a tonne. Copper rallied almost 8 percent from mid-November to hit a two-month high a week ago, but has since lost some ground.

Gold rose 0.3 percent to around $1,675 an ounce, after falling to $1,661.01 on Tuesday, its lowest since August.

(Additional reporting by Miranda Maxwell in Melbourne, Ian Chua in Sydney and Melanie Burton in Singapore; Editing by Richard Borsuk)

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