MOSCOW (AP) — European shares traded lower early on Friday on waning hopes that U.S. President Barack Obama and key lawmakers would manage to reach an 11th-hour budget compromise.
U.S. politicians have until Monday night to hammer out an agreement before the U.S. runs over the "fiscal cliff" — hundreds of billions of dollars in tax increases and deep cuts to government spending that automatically kick in on Jan. 1. Such a drastic measure could throw the U.S. into another recession, economists have warned.
Britain's FTSE 100 was marginally lower at 5,951.10 points in mid-morning trading Friday while Germany's DAX declined by 0.3 at 7,632.66 and France's CAC-40 was off 0.7 percent to 3,649.89.
Ahead of the opening bell, Dow Jones industrial futures dropped 0.3 percent at 13,005. S&P 500 futures were marginally lower at 1,408.40.
"Equities look set to exit 2012 with a whimper, after politicians in Washington said that a deal to resolve the budget issues is now very unlikely before the deadline," Chris Weafer of Moscow-based Sberbank CIB investment bank said in a note.
Congressional leaders and President Barack Obama are expected to meet later Friday at the White House for last-minute talks. Obama and congressional Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.
Failure to avoid the fiscal cliff doesn't necessarily mean tax increases and spending cuts would become permanent, since the new Congress could pass legislation to cancel them retroactively after it begins its work next year.
"Even if it falls into the fiscal cliff, you will only reduce the deficit by about $100 billion," said Francis Lun, managing director of Lyncean Holdings in Hong Kong, referring to the U.S. economy. "In Chinese terms, it's like trying to douse a fire with a cup of water. They should do what Europe has done and try to impose austerity."