U.S. Markets closed

World stocks put relief rally on pause

David Mchugh, AP Business Writer

Filipino traders hear a mass before the start of the first day of trading at Philippine Stock Exchange at the financial district of Makati, south of Manila, Philippines on Wednesday Jan. 2, 2013. Stock markets in Asia registered relief Wednesday over the U.S. congressional vote to stop hundreds of billions of dollars in automatic tax increases and spending cuts that risked plunging the world's biggest economy into recession. (AP Photo/Aaron Favila)

FRANKFURT, Germany (AP) -- Enthusiasm faded on Wall Street and in European markets Thursday over U.S. legislators' deal to stave off the so-called fiscal cliff, a series of automatic tax increases and spending cuts that could have hurt the world's largest economy.

While the deal passed by Congress this week avoids the near-term risk of a major blow to businesses and households, it left unsolved several budget measures, mainly government spending cuts.

Major indexes fell modestly or saw only small gains as investors considered that U.S. politicians now have only two months to negotiate those cuts.

Wall Street lacked momentum after strong gains the previous day. The Dow industrials average was flat at 13,415.12 and the broader Standard & Poor's 500 index was up barely 0.1 percent at 1,464.31.

In Europe, Germany's DAX shed 0.3 percent to close at 7,756.44 and France's CAC-40 lost 0.3 percent to 3,721.17. Britain's FTSE 100 rose 0.3 percent to 6,047.34. Shares rose sharply in Switzerland, however, as markets there were closed on Wednesday.

A last-minute deal agreed to by U.S. lawmakers late Tuesday triggered a global market rally on Wednesday. But while it settled tax rates, the deal only postponed automatic spending cuts to defense and domestic programs for two months. And it doesn't include any significant deficit-cutting agreement, meaning the country still doesn't have a long-term plan on how to curb spending.

Rabobank analyst Jane Foley said that a "more realistic sense" of the situation with U.S. budget affairs "has started to trickle into market sentiment this morning."

"Over the next couple of months, U.S. budget talks are set to remain a threat to risk appetite," Foley wrote in a note to investors.

Looking ahead, investors will keep an eye on the U.S. monthly jobs report due Friday. The figures often move markets as they are a key indicator for the health of the U.S. economy, which has struggled to gain steam in recent months.

Figures from human resources firm ADP showed U.S jobless claims rose by more than expected to 372,000. But that was offset by more positive figures showing the economy created 215,000 new jobs during the month.

The ADP numbers are a prelude to Friday's official U.S. government numbers.

Earlier in Asia, benchmarks in Hong Kong and Sydney rose modestly and crested above the 19-month highs hit Wednesday. Hong Kong's Hang Seng Index rose 0.1 percent to 23,398.98, while Australia's S&P/ASX 200 rose 0.7 percent to 4,740.70. Benchmarks in Singapore, Taiwan, Indonesia, Thailand, the Philippines and New Zealand also rose.

Still, South Korea's Kospi fell 0.6 percent to 2,019.41 amid fears the weakening Japanese yen could hurt South Korean exporters.

Markets in Japan and mainland China were closed for extended holidays until Friday.

In currencies, the euro was down 0.6 percent at $1.311 while in commodity markets the benchmark crude oil contract was trading 5 cents higher at $93.17 in New York.


Pamela Sampson contributed from Bangkok.