Asian shares and United States stock index futures fell sharply in early trading on Friday after a Republican proposal to fend off a fiscal crunch failed to get enough support, deepening uncertainty over prospects for negotiations to avert automatic spending cuts and tax increases set to start in January.
“Markets dislike signs of further delay in talks, with the risk that a deal may not be reached by the end-of-the-year deadline,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. “It clearly hit risk sentiment.”
Assets that carried a risk of devaluation were sold off, from stock shares to oil to currencies like the Australian dollar and the euro, which fell while the Japanese yen rose slightly.
Futures on the Standard Poor’s 500-stock index fell 1.5 percent on worries over the breakdown.
On Thursday, global shares rose as lawmakers in Washington continued in their budget negotiations, but gold prices tumbled to their lowest level since August on a burst of year-end selling.
Wall Street rebounded from early losses, after the House speaker, John Boehner, said he would keep working on a solution to the budget negotiations. Republicans in the House pushed ahead with their own plan to avoid a series of tax increases and spending cuts expected next month, complicating negotiations with the White House. President Obama has vowed to veto the plan, which would raise taxes only on the wealthiest Americans.
“Speaker Boehner went on the air and basically told us he doesn’t like what the president’s doing or not doing, and the markets rallied on that, which was kind of weird,” said Stephen Guilfoyle, a trader at Meridian Equity Partners in New York.
When that plan fell apart, well after the close of market trading, stock index futures, and Asian shares went into a swoon.
Investors have hoped for an agreement soon, but progress has been slow.
The lack of progress in Washington kept most markets in a virtual holding pattern. Currencies held to tight ranges in thin preholiday trade, and the euro seesawed against the dollar. In commodities markets, crude oil futures edged higher while Brent futures slid in choppy trade.
The Dow Jones industrial average was up 59.75 points, or 0.45 percent, at 13,311.72 on Thursday. The Standard Poor’s 500-stock index was up 7.88 points, or 0.55 percent, at 1,443.69. The Nasdaq composite index was up 6.02 points, or 0.20 percent, at 3,050.39.
NYSE Euronext, the operator of the New York Stock Exchange, had the biggest gains on Thursday, surging 34.1 percent to $32.25, after the IntercontinentalExchange said it would buy the company for $8.2 billion. Intercontinental rose 1.4 percent to $130.10.
The MSCI world equity index, which has risen steadily over the last five weeks on optimism that a budget deal would clear the way for stronger growth in 2013, was up 0.2 percent to near 343 points on Thursday. It remains near levels last seen in July 2011.
In Europe, shares stuttered as indexes approached levels considered overbought. The FTSEurofirst 300 closed virtually unchanged at 1,142.80 points.
In currency markets, investors struggled to gauge developments on the American budget talks against a backdrop of generally positive economic data in the United States.
The euro recouped earlier losses to gain 0.1 percent at $1.3226. On Wednesday, the euro hit an eight-and-a-half-month high of $1.3308.
In the oil market, crude in the United States settled 0.17 percent higher at $90.13 a barrel, after trading $89.26 to $90.54 a barrel in a thin market.
Interest rates were lower. The Treasury’s benchmark 10-year note rose 2/32, to 98 14/32, and the yield fell to 1.80 percent from 1.81 percent late Wednesday.
Article source: http://www.nytimes.com/2012/12/21/business/daily-stock-market-activity.html?partner=rss&emc=rss