BANGKOK (AP) -- Asian stocks tumbled Thursday as hopes began to fade for a quick agreement among U.S. leaders to avoid a "fiscal cliff" that could derail the world's biggest economy.
Unless President Barack Obama and Congress reach a compromise, a series of expiring tax cuts and across-the-board spending reductions will take effect in 2013 — at a cost of about $800 billion. Economists say that could knock the U.S. economy back into recession.
A widely predicted leadership change in China didn't appear to impact stock markets one way or the other. As expected, Xi Jinping secured the top spot in the Communist Party on Thursday, replacing outgoing leader Hu Jintao. Xi was introduced as general secretary at Beijing's Great Hall of the People, a day after the close of a party congress that underlined the communists' resolve to hold on to power.
Hong Kong's Hang Seng fell 1 percent to 21,237.14. South Korea's Kospi shed 1.3 percent to 1,869.32. Australia's S&P/ASX 200 fell 0.9 percent to 4,349.40. Benchmarks in Singapore, Taiwan, Thailand and mainland China also fell.
Analysts at Credit Agricole CIB said in a market commentary that a "cautious tone" is likely to permeate trading, given the uncertainty over the situation in the U.S. Obama is expected to meet the top leaders of both political parties at the White House on Friday for discussions.
Meanwhile, Japanese stocks were kept buoyant by reports that Japanese parliamentary elections have been set for Dec. 16 and a weakening yen. The Nikkei 225 index jumped 1.8 percent to 8,817.10 after Prime Minister Yoshihiko Noda reportedly pledged to dissolve the parliament by Friday if the opposition agreed to key reforms.
"Japan is up today because of the announcement of an election date in the hope that there may be some more stimulatory policies as a result of that," said Peter Elston, strategist at Aberdeen Asset Management in Singapore.
Overall, many investors remain uneasy with the persistent weakness in the world's biggest economies and a lack of private sector confidence, which discourages companies and households from spending despite stimulus programs by central banks.
"The concern that I have is that when economies were weak three years ago, governments were able to come to the rescue," Elston said. "They are not as able to provide support now because their balance sheets are a lot weaker than they were."
Investors also remain unnerved after demonstrations Wednesday in Europe by workers who are protesting the austerity measures that governments have been imposing to reduce public debt.
On top of that, official figures showed industrial output among the 17 countries that use the euro dropped 2.5 percent on the month in September, worse than analysts had expected. Figures on Thursday are expected to confirm that the eurozone is in recession.
Among individual stocks, Hong Kong-listed Esprit Holdings Ltd. shot up 20 percent on news that former chairman Michael Ying doubled his stake to about 10 percent, raising hopes that he would return to help turn around the company, which has suffered due to Europe's debt crisis.
A weakening yen helped Japan's exporters by making their products less expensive when sold overseas. Mazda Motor Corp. soared 5.6 percent. Honda Motor Co. surged 3.9 percent.
Stocks on Wall Street fell sharply Wednesday as hope diminished for a compromise on the tax and spending cuts due to take effect in 2013. The Dow closed down 1.5 percent, at 12,570.95. The Standard & Poor's 500 index fell 1.4 percent to 1,355.49. The Nasdaq composite index lost 1.3 percent to 2,846.81.
Benchmark oil for December delivery was down 2 cents to $86.30 in electronic trading on the New York Mercantile Exchange. The contract rose 94 cents to close at $86.32 a barrel on the Nymex on Wednesday.
In currencies, the euro fell to $1.2735 from $1.2745 late Wednesday in New York. The dollar jumped to 80.80 yen from 80.17 yen.
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