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Thanksgiving celebrations offset looming fiscal cliff woes  Join our daily free Newsletter

MENAFN - ecPulse - 24/11/2012

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An average week of important data and news has ended in the U.S, which kept investors concentration on the European debt crisis, despite the fiscal cliff developments. The week was cut short with the Thanksgiving celebrations as U.S. financial markets were closed last Thursday and returned to short light-volume trading day on Friday.

The focus remained on Europe and the fiscal cliff in global financial markets. Ben Bernanke the Federal Reserve governor warned of not reaching an agreement between Democrats and Republicans over the budget which will lead the U.S. into recession.

The so-called “fiscal cliff” is the main concern for investors after the U.S. presidential election and the re-election of President Barack Obama for another term, fear of not reaching an agreement to cut the budget deficit and applying triggering the fiscal cliff still dominates the markets.

Fiscal cliff consist of automatic taxes increases and spending cuts with nearly 600 billion that will come into effect January 01, 2013 if Congress fails to reach a budget deal, the implications of which will push the economy back to recession; contracting 0.5 percent at the beginning of 2013.

The main disagreement between Democrats and Republicans is on taxes, where Democrats want to increase taxes and especially on the highest earners, while Republicans refuses that and they insist for equal taxes for all Americans. The complexity expands with the Democrats in control of the Senate and Republicans controlling the House, which makes a vote on any bill even harder!

Fluctuations in confidence levels dominate markets driven by the uncertainty over the fiscal cliff; despite the European debt crisis and disagreement between European financial ministers on Greece aid the fears dimmed to the end of the week on expectations Greece will be granted this week at the finance ministers meeting which supported the wave of optimism and gains across the board, sending the euro to the highest in four weeks.



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