US fiscal uncertainty keeps lid on markets

LONDON — Uncertainty over whether Washington will agree a spending and taxation deal that is crucial to keeping the U.S. economic recovery on track kept a lid on global market gains on Monday.

Economists have said the U.S. risks slipping into recession if hundreds of billions of dollars in expiring tax cuts and automatic spending reductions take effect on Jan. 1 — the so called "fiscal cliff." Congress and the White House must find a compromise to prevent a big hit to the world's biggest economy.

President Barack Obama, fresh from a re-election victory, and House Speaker John Boehner have spoken of compromise but appear to be taking a firm stances on some issues, including whether to raise taxes for the wealthiest.

"Despite comments from the U.S. administration and Congressional leaders of a willingness to compromise, markets remain unconvinced," said Mitul Kotecha, analyst at Credit Agricole CIB.

European stocks lacked momentum in afternoon trading. Britain's FTSE 100 was up 0.2 percent to 5,780.20 while Germany's DAX edged up 0.3 percent to 7,182.88. France's CAC-40 lost 0.3 percent to 3,414.66.

Wall Street opened modestly higher — the Dow was 0.1 percent higher at 12,827.64 while the S&P 500 was up 0.2 percent at 1,382.84.

In Europe, investors will keep their eyes on a meeting of the finance ministers of the 17-country eurozone. The officials are expected to discuss Greece's economy and its bailout program.

Greece is waiting for approval of the next €31.5 billion ($40 billion) payout of its bailout loan. It faces a bond repayment on Friday it cannot afford.

The finance ministers will discuss the findings of a report on Greece by international debt inspectors at the meeting in Brussels. But no decision on giving Greece new loans is likely to be made at the meeting because some eurozone parliaments must approve the deal. Greek lawmakers approved the country's 2013 austerity budget early Monday, essential to unblocking the new payment.

Earlier in Asia, Japan's Nikkei 225 index fell 0.9 percent to close at 8,676.44. Growth figures showed the economy contracted an annualized 3.5 percent rate for the quarter ending September. Most economists forecast a further decline in economic activity for the October-December quarter, which would officially put the world's No. 3 economy in recession, according to the common definition of two consecutive quarters of contraction.

South Korea's Kospi fell 0.2 percent to 1,900.87 and Australia's S&P/ASX 200 lost 0.3 percent to 4,448.00. Benchmarks in Singapore, Taiwan and Indonesia fell. The Philippines and New Zealand rose.

Hong Kong and mainland Chinese stock markets rose following comments over the weekend by Chinese Cabinet officials that the country's economic slowdown has ended, although the economy is not ready to stage a recovery, and that exporters still face tough conditions.

Hong Kong's Hang Seng added 0.2 percent to 21,430.30. The Shanghai Composite Index gained 0.5 percent to 2,079.27 and the smaller Shenzhen Composite Index added 0.5 percent to 832.38.

Jackson Wong, vice president at Tanrich Securities in Hong Kong, cautioned against too much optimism regarding China's economy amid disappointing Chinese loan growth figures.

Lending in October stood at 505.2 billion yuan ($80.3 billion), dropping 81.6 billion yuan from a year earlier, the People's Bank of China said Monday, according to Xinhua news agency. The figure decreased from the 623.2 billion yuan of new yuan loans registered in September.

"Expect light trading this week unless major news comes out," Wong said.

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