Fiscal cliff casts shadow over markets

THE London market pulled back yesterday as the US appeared to drift towards its fiscal cliff of automatic tax rises and spending cuts.

The FTSE 100 Index dropped 28.93 points or 0.5 per cent to 5,925.37 as analysts pointed out that the world’s largest economy will probably have to muddle through into the new year without legislation to fill the gap in its finances.

Joshua Mahony, a research analyst at Alpari, said: “The ongoing fiscal cliff crisis is drawing to an end as President Obama calls a meeting of top congressional leaders to try to create a deal which would be palatable for both sides.

“However, as the day has gone on, it has become more and more likely that the fiscal cliff may actually occur as rumours circle that there has been very little ground made in terms of finding compromise.”

A meeting set up for tomorrow at the House of Representatives is seen as the final potential moment to ratify any legislation. It is thought that could be a scaled down package that covers the worst aspects of the cliff and can be upgraded in the new year.

The lack of appetite for risk meant London-listed miners were out of favour. Fresnillo and Polymetal international were both around 1.5 per cent lower at 1,857p and 1,168p respectively.

Scotland’s oil stocks were also on the slide. Cairn Energy was down 1.5p at 262.7p and Parkmead was 0.5p lower at 14p.

Insurers were another casualty, with Admiral the biggest FTSE 100 loser, down 22p to 1,176p. Prudential was off 12p at 865p, with Aviva losing 5p to 375.7p. Instead defensives such as supermarkets were in demand. Morrisons added 1.5p at 262.7p and Tesco rose by the same figure to 337.5p.

NEW YORK: US stocks fell for a fifth straight session, dropping 1 per cent and marking the S&P 500’s longest losing streak in three months as the government edged closer to the “fiscal cliff” with no solution in sight.

The Dow Jones industrial average fell 158.20 points, or 1.21 per cent, to finish at 12,938.11 while the Standard & Poor’s 500 Index dropped 15.67 points, or 1.11 per cent, to close at 1,402.43. The Nasdaq Composite Index lost 25.59 points, or 0.86 per cent, to end at 2,960.31.