Global stocks sag on fiscal angst after U.S. vote

Wed Nov 7, 2012 12:29pm EST
 
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By Richard Leong

NEW YORK (Reuters) - World shares and the euro fell on Wednesday as investors worried that the deep fiscal challenge facing President Barack Obama after his re-election could lead to a new recession.

Fresh concerns about Europe's debt crisis added to the jitters among investors, who scrambled for safer assets. U.S. Treasury yields were set for their biggest one-day fall since May.

Worry persisted whether Obama could reach a timely deal with Republican lawmakers in the lame-duck session of a divided Congress to avert the "fiscal cliff" -- the $600 billion in automatic tax hikes and spending cuts set to start kicking in on January 1.

"The minute such a deal is cut, we'll boom. If one is not cut - and soon - we may well double-dip into recession," said Robert L. Reynolds, president and chief executive of Putnam Investments in Boston.

"This upcoming lame-duck session may just be the most consequential in our lifetimes. The stakes are high and the time is short," he said in a statement.

Traders were also worried about a vote in Greece's parliament later on Wednesday on an austerity package needed to secure a fresh injection of international aid and avert bankruptcy, which would rock the euro zone and world markets.

European Central Bank President Mario Draghi said the ECB expects the euro zone economy to remain weak "in the near term" and that the problems were spreading to Germany.

"A lot depends on this vote today in Greece," said Mark Priest, head of Index & Equity Market Making at ETX Capital in London.   Continued...

 
A TV showing news on re-elected U.S. President Barack Obama is pictured in front of the German share price index DAX board at the German stock exchange in Frankfurt November 7, 2012. REUTERS/Lisi Niesner