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While you were sleeping: Budget talks turn frosty

While you were sleeping: Budget talks turn frosty

Dec 21 (BusinessDesk) – Momentum stalled on Wall Street as did budget talks between Democrats and Republicans aimed at preventing the US from falling over a fiscal cliff at the end of the month.

Today Republicans in Congress will vote on House Speaker John Boehner’s plan to raise taxes on incomes over US$1 million, a plan President Barack Obama would veto as he's now seeking a US$400,000 threshold.

Officials from Obama’s administration told leaders of US business and financial-services groups that negotiations with Boehner have deteriorated in the last 24 hours, Bloomberg News reported, citing a person familiar with the meeting.

"The market still believes that there will be an announcement of some sort. But as the clock is ticking, the most you're going to get is a stop-gap measure," Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, told Reuters.

Whether those expectations will prove correct is increasingly challenging to ascertain.

"It is very difficult to say if the optimism out there is warranted," Alec Young, global equity strategist at S&P Equity Research in New York, told Reuters. "We don't know what's going on behind the scenes, and that makes it very difficult to account for all the uncertainty out there."

In afternoon trading in New York, the Dow Jones Industrial Average gained 0.11 percent and the Standard & Poor's 500 Index rose 0.09 percent. The Nasdaq Composite Index slipped 0.14 percent.

The latest data showed that the US economy expanded 3.1 percent in the third quarter—stronger than previously estimated, and that existing home sales rose a better-than-expected 5.9 percent in November.

However, the number of Americans filing new claims for jobless benefits climbed more than predicted in the latest week.

"It is great to see this kind of growth, but investors know it could all disappear if there's no deal on the cliff," Todd Schoenberger, managing partner at LandColt Capital in New York, told Reuters. "Macro data may be on the back burner for a while."

In Europe, the Stoxx 600 Index closed with a gain of almost 0.1 percent for the day. Shares in Frankfurt and Paris eked out an advance of nearly 0.1 percent, while those in the UK slipped by a similar narrow margin.

UK retail sales unexpectedly shrank in November, raising concerns the nation's economic outlook is darkening.

"The economic outlook has got worse and consumers are probably still really uncertain,” Rob Wood, an economist at Berenberg Bank in London and a former Bank of England official, told Bloomberg. “There’s no good news ahead for them in the near term.”

(BusinessDesk)

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