World Markets Drop as US Teeters on Fiscal Cliff

Investors alarmed by failure to reach deal
By Rob Quinn,  Newser Staff
Posted Dec 31, 2012 4:55 AM CST
World Markets Drop as Fiscal Cliff Nears
Anybody awake in there?   (AP Photo/J. David Ake)

Can American lawmakers hammer out a deal in time to avoid the fiscal cliff and toast the New Year? Investors worldwide are betting no. Uncertainty about budget negotiations and the future of the US economy drove down Asian markets on the last day of the year and European markets also saw falls in early trading, the AP reports. Lawmakers announced yesterday that talks had hit yet another roadblock.

The cliff's combination of tax hikes and spending cuts could put the US back in recession and while it could be possible to keep them at bay temporarily even without a deal, missing the deadline will seriously damage investor confidence, the chief of investment firm Lycean Holding predicts. "I think the market reaction to that will be very negative. This means the US will never be able to bring its house in order. And the deficit will continue to accumulate," he says. "No meaningful reform and no solution in sight. You can throw confidence out of the window." (More fiscal cliff stories.)

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