News with Tags "World Updates"

WASHINGTON (Reuters) - The Congress headed toward another showdown over the "fiscal cliff" on Tuesday as Republicans in the House of Representatives mounted a last-ditch effort to reshape a tax deal meant to prevent Washington from pushing the world's biggest economy into recession.

If successful, the measure would set up a high-stakes showdown with the Democratic-controlled Senate and risk a stinging rebuke from financial markets about to open in Asia.

If it fails, lawmakers - including many Republicans - would likely back tax hikes for the wealthiest Americans and thus resolve a main chapter of the fiscal crisis that has consumed Washington for months.

One senior Republican suggested the House would ultimately approve a Senate bill that raises taxes, ending the current fiscal cliff crunch and giving President Barack Obama a victory, while easing worries in financial markets.

"We've gone as far as we can go and I think people are ready to bring it to a conclusion," Republican Representative Jack Kingston of Georgia said. "We fought the fight."

The measure being considered on Tuesday night by House Republicans would add $330 billion in spending cuts over 10 years to the Senate bill, which raises taxes on the wealthiest U.S. households by $620 billion over the same period.

But some House Republicans were worried that changing the Senate bill would only drag out the political drama.

And Senate Democrats say they will refuse to consider any changes to their bill, which passed 89 to 8 in a rare display of unity early Tuesday morning.

Lawmakers have struggled to find a way to head off across-the-board tax hikes and spending cuts that began to take effect at midnight, a legacy of earlier failed budget deals that is known as the fiscal cliff.

OVER THE CLIFF

Strictly speaking, the United States went over the cliff in the first minutes of the New Year because Congress failed to produce legislation to halt $600 billion of tax hikes and spending cuts set for 2013 that started kicking in on January 1.

But with financial markets and federal government offices closed for the New Year's Day holiday, lawmakers had a little more time to work out a compromise without real-world consequences.

House Speaker John Boehner has struggled over the past two years to control his members, and he might have difficulty rounding up the 217 votes needed for passage of the spending cuts.

Republican aides said if that happened they would then hold an up-or-down vote on the Senate's bill. With House Democrats largely behind the Senate measure, Boehner would then only need to find 40 or so votes from his side to send the measure on to Obama to sign into law.

Republican Representative Steve LaTourette of Ohio, a close ally of Boehner, suggested the speaker could find that much support among his own ranks.

Republicans could face a backlash if they scuttle the deal. Income tax rates rose back to 1990s levels for all Americans at midnight, and across-the-board spending cuts on defense and domestic programs would begin to kick in on Wednesday.

Economists say the combination of tax cuts and spending cuts could cause the economy to shrink, and public opinion polls show Republicans would shoulder the blame.

(Additional reporting by Rachelle Younglai and; David Lawder, Writing by Andy Sullivan; Editing by Alistair Bell and Eric Beech)

SYDNEY (Reuters) - Markets were eerily quiet in Asia as trade resumed on Wednesday with investors anxiously waiting to see if the U.S. Congress could strike a last-minute deal to avoid triggering tax rises and spending cuts that could threaten the global economy.

The U.S. Senate early on Tuesday passed a bill that aims to avoid the "fiscal cliff" of $600 billion in automatic spending cuts and tax increases.

However, the package immediately ran into opposition from House Republicans, who were meeting to decide whether to reject or amend the bill .

"Frankly, we don't know what to make of it all. It's like a circus there," said one exasperated forex dealer at an Australian bank in Sydney.

"The markets have always assumed they would eventually strike a deal that would avoid the worst affects of the fiscal cliff, but it's getting harder and harder to stay optimistic."

He suspected equity markets would be on the defensive as they opened, with safe-haven bonds in demand. Getting a read on trends was tricky as U.S. Treasuries and stock futures were yet to trade, while Tokyo was off on holiday.

Currencies were trading, but the only major move was further weakness in the Japanese yen as investors wagered the Bank of Japan would have to take ever more aggressive easing steps to support the economy and satisfy the new government.

The dollar held firm on the yen at 86.75 yen, having touched its highest level since August 2010. The Japanese currency also dropped to depths not seen in over four years against the Australian and New Zealand dollars.

The euro was a shade firmer against the U.S. dollar at $1.3216, but turnover was extremely thin.

Spot gold was little changed at $1,674 an ounce, while oil futures dipped 20 cents to $91.62.

(Reporting by Wayne Cole; Editing by Eric Meijer)

SYDNEY (Reuters) - Markets were eerily quiet in Asia as trade resumed on Wednesday with investors anxiously waiting to see if the U.S. Congress could strike a last-minute deal to avoid triggering tax rises and spending cuts that could threaten the global economy.

The U.S. Senate early on Tuesday passed a bill that aims to avoid the "fiscal cliff" of $600 billion in automatic spending cuts and tax increases.

However, the package immediately ran into opposition from House Republicans, who were meeting to decide whether to reject or amend the bill .

"Frankly, we don't know what to make of it all. It's like a circus there," said one exasperated forex dealer at an Australian bank in Sydney.

"The markets have always assumed they would eventually strike a deal that would avoid the worst affects of the fiscal cliff, but it's getting harder and harder to stay optimistic."

He suspected equity markets would be on the defensive as they opened, with safe-haven bonds in demand. Getting a read on trends was tricky as U.S. Treasuries and stock futures were yet to trade, while Tokyo was off on holiday.

Currencies were trading, but the only major move was further weakness in the Japanese yen as investors wagered the Bank of Japan would have to take ever more aggressive easing steps to support the economy and satisfy the new government.

The dollar held firm on the yen at 86.75 yen, having touched its highest level since August 2010. The Japanese currency also dropped to depths not seen in over four years against the Australian and New Zealand dollars.

The euro was a shade firmer against the U.S. dollar at $1.3216, but turnover was extremely thin.

Spot gold was little changed at $1,674 an ounce, while oil futures dipped 20 cents to $91.62.

(Reporting by Wayne Cole; Editing by Eric Meijer)

WASHINGTON (Reuters) - Last-minute efforts to step back from the "fiscal cliff" ran into trouble on Tuesday as Republicans in the House of Representatives balked at a deal that would prevent Washington from pushing the world's biggest economy into a recession.

House Republicans complained that a bill passed by the Senate in a late-night show of unity to prevent a budget crisis contained tax hikes for the wealthiest Americans but no spending cuts. Some conservatives sought to change the bill to add cuts.

That would set up a high-stakes showdown between the two chambers and risk a stinging rebuke from financial markets that are due to open in Asia in a few hours.

The Senate would refuse to accept any changes to the bill, a Senate aide said, and it appeared increasingly possible that Congress could push the country over the fiscal cliff after all, despite months of effort.

Strictly speaking, the United States went over the cliff in the first minutes of the New Year because Congress failed to produce legislation to halt $600 billion of tax hikes and spending cuts that start kicking in on January 1.

But with financial markets and federal government offices closed for the New Year's Day holiday, lawmakers had a little more time to work out a compromise without real-world consequences.

The Senate bill drew overwhelming support from Republicans and Democrats alike when it passed by a vote of 89 to 8.

But Republicans who control the House expressed wide dismay with the measure, which includes only $12 billion in spending cuts along with $620 billion in tax increases on top earners.

Majority Leader Eric Cantor, the No. 2 Republican in the House, told reporters after huddling with other Republicans that he does not support the Senate's bill.

"The lack of spending cuts in the Senate bill was a universal concern amongst members in today's meeting. Conversations with members will continue throughout the afternoon on the path forward," said Cantor spokesman Rory Cooper.

Republicans returned for a second meeting at 5:15 p.m. EST (2215 GMT).

Republicans could face a backlash if they scuttle the deal. Income tax rates rose back to 1990s levels for all Americans at midnight, and across-the-board spending cuts on defense and domestic programs would begin to kick in on Wednesday.

Economists say the combination of tax cuts and spending cuts could cause the economy to shrink, and public opinion polls show Republicans would shoulder the blame.

MARKET DISCIPLINE?

Lingering uncertainty over U.S. fiscal policy has unnerved investors and depressed business activity for months.

Financial markets have staved off a steep plunge on the assumption that Washington would ultimately avoid pushing the country off the fiscal cliff into a recession.

Several Republicans said the fight could spill over until Wednesday, at which point they could be pressured by financial markets to accept the Senate bill.

"Everyone knows once the markets open tomorrow our courage drops in direct proportion to the market fall," said one Republican lawmaker who spoke on condition of anonymity.

The bill passed by the Democratic-led Senate at around 2 a.m. would raise income taxes on families earning more than $450,000 per year and limit the amount of deductions they can take to lower their tax bill.

Low temporary rates that have been in place for less-affluent taxpayers for the past decade would be made permanent, along with a range of targeted tax breaks put in place to fight the 2009 economic downturn.

However, workers would see up to $2,000 more taken out of their paychecks annually as a temporary payroll tax cut was set to expire.

The non-partisan Congressional Budget Office said the Senate bill would increase budget deficits by nearly $4 trillion over the coming 10 years, compared to the budget savings that would occur if the extreme measures of the cliff were to kick in.

But the bill would actually save $650 billion during that time period when measured against the tax and spending policies that were in effect on Monday, according to the Committee for a Responsible Federal Budget, an independent group that has pushed for more aggressive deficit savings.

(Additional reporting by Richard Cowan; Writing by Andy Sullivan; Editing by Alistair Bell and Eric Beech)

NEW YORK (Reuters) - U.S. stocks rose on Monday and global equities headed for their best year in the last three as U.S. lawmakers neared a deal to avoid a budget crisis that many fear could cripple the world economy in 2013.

A tentative deal that would raise taxes on those earning more than $400,000, extend middle class tax cuts and postpone some defense spending cuts was expected to garner support of a majority of Senate Republicans.

If approved, the deal would prevent some $600 billion of automatic tax increases and spending cuts from taking effect in January, a blast of fiscal austerity that economists fear could thrust the United States into recession and hurt world growth.

President Barack Obama was expected to make a statement at 1:30 p.m. ET.

"For all the dire outlook on Friday, things look a lot closer to something getting done than we previously thought," said Rick Klingman, managing director of Treasuries trading at BNP Paribas in New York.

U.S. stocks hit session highs after news that lawmakers were nearing a deal. The Dow Jones industrial average was up 43.39 points, or 0.34 percent, at 12,981.50. The Standard & Poor's 500 Index was up 8.18 points, or 0.58 percent, at 1,410.61. The Nasdaq Composite Index was up 30.09 points, or 1.02 percent, at 2,990.40.

Despite recent declines on Wall Street over the stalemated budget talks, the benchmark Standard & Poor's 500 was up about 11.5 percent in 2012 after a nearly flat performance the prior year. The Dow was up 6 percent and the Nasdaq 14 percent.

The MSCI all-world index was on track to end the year up nearly 13 percent.

The pan-European FTSEurofirst 300 has also gained roughly 13 percent this year, largely due to the European Central Bank's vow to tackle the region's debt crisis, and recovered from an early morning dip to end the year at 1,131.64.

The benchmark 10-year U.S. Treasury note fell 14/32, with the yield at 1.75 percent on expectations that a budget deal would get done.

With the world's major central banks expected to keep pumping stimulus into their economies at any sign of weakness, most economists forecast further gains in equities next year.

Hopes for a U.S. budget deal also lifted U.S. light sweet crude 64 cents to $91.44.

STILL RISKS AHEAD

That's not to say uncertainty will evaporate in 2013. For one thing, a deal to avert the U.S. fiscal cliff likely will not involve a long-term plan to reduce the U.S. budget deficit, which has been above $1 trillion for four straight years.

"Even if we end up with a deal, it will be just a band-aid, not a real fix," said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York.

Europe's debt crisis, meanwhile, has eased thanks to aggressive ECB efforts to protect the euro. Yields on Spanish and Italian sovereign bonds, a measure of the risk creditors attach to lending those governments money, spiked in the summer but have since fallen sharply.

Euro zone bond markets were closed for the day on Monday after a roller coaster year.

The euro was down 0.1 percent at $1.3197 but is up 2 percent for the year. An agreement on the U.S. budget would also be viewed as positive for the euro because it would help boost global growth, while deadlock is seen as dollar-positive.

(Editing by Chizu Nomiyama)

CAIRO (Reuters) - Egypt's pound fell to a record low on Monday as the president signaled his government would allow it to depreciate slowly for several more days to stop a drain on foreign reserves that has driven the economy into crisis since the fall of Hosni Mubarak.

Hit by a new bout of political turmoil in the last month, the pound had weakened to a record low on Sunday at a new dollar auction brought in by the central bank. It fell further at a second auction on Monday, last trading at 6.37 to the dollar on the interbank market.

The drop means the central bank has allowed the pound to slide almost 3 percent over the last two days after limiting its decline to only 6 percent since the uprising that removed Mubarak from power almost two years ago.

The pound's fall, which is certain to increase the price of imported staples such as tea and sugar, underlines the economic crisis facing President Mohamed Mursi as his administration tries to contain the political fall-out of his move to fast-track a contentious new constitution passed into law last week.

Egyptians, panicked by street clashes between Mursi's Islamist backers and his more secular-minded opponents on the streets of Cairo and other cities, have rushed to change their pounds into dollars in recent weeks, fearing it would be devalued further.

"The market will return to stability," Mursi told Arab journalists on Sunday evening, the state news agency MENA reported.

The pound's fall "does not worry or scare us, and within days matters will balance out," he said.

Having just sold their last dollar bills, dealers at one Cairo foreign exchange bureau did not bother changing the price board when the new low appeared on their trading screens.

"He took our last dollars," one of the traders said, pointing to a man walking out of the door.

Outside, another man told a friend his dollar hunt had failed. "They have no dollars. What can I do?" he said on a mobile phone. "I went to many dealers and could not find dollars."

The fall has been driven mainly by ordinary citizens who have been trying to turn their savings into foreign currency, worried that the pound will weaken further because of the latest political turmoil.

The crisis wiped 10 percent off the value of Egyptian stocks when it erupted in late November. But the main index has mostly recovered since then, climbing in the two sessions since the introduction of the new foreign currency system.

Market participants attribute the rise to buying by Arab and international investors using the cheaper pound to bargain hunt.

FREE FLOATING POUND

The auctions are part of a shift announced on Saturday and designed to conserve foreign reserves, which the bank says are now at "critical" levels that cover just three months of the food, fuel and other goods Egypt imports.

Bankers have described the new system as a move toward establishing a free market value for the pound, which has been tightly controlled since a managed devaluation that ended in 2004.

The head of the Egyptian banking federation said the new system was an "important first step" toward a free float.

In remarks to MENA, Tarek Amer, who is also chairman of Egypt's largest bank, state-owned National Bank of Egypt, said the new system was a success on its first day and had "significantly reduced" demand for dollars.

The International Monetary Fund also gave the new currency policy its stamp of approval, an important imprimatur given that Egypt hopes to secure a $4.8 billion IMF loan. "IMF staff is in close contact with the authorities and we remain strongly committed to supporting Egypt," an IMF spokeswoman said.

The central bank has sold about $75 million at each of Sunday's and Monday's auctions.

The run on the pound prompted officials last week to impose controls on how much cash could be physically carried out of the country. Security men at one Cairo bank branch had to remove one customer angered by a $10,000 limit on how much currency he could withdraw, witnesses said.

The changes announced on Saturday include regular foreign currency auctions and limit how much foreign currency companies can withdraw at a time.

The central bank had spent more than $20 billion - or more than half of its reserves - over the past two years to defend the currency. The reserves fell an additional $448 million in November to about $15 billion.

Prices of imports have already started to rise. Pyramid Oil Field, a company that imports chemicals for use in water treatment and oil fields, had raised its prices 10 to 15 percent last week, fearing a further weakening of the pound.

"This instability obliges you to increase the price, to have a safety factor," Ashraf el-Gamal, president and managing director of the company, told Reuters. "From now on, the contracts will be of a very short validity."

To be on the safe side, he was projecting that the pound would weaken to stand at 9 against the euro, compared with a previous level of 8.

ECONOMY FRAGILE

Prime Minister Hisham Kandil said on Sunday that the economy was in "a very difficult and fragile" situation, adding that he expected loan talks with the IMF to resume in January.

Egypt won preliminary approval in November from the IMF for the loan, but delayed seeking final approval until January after it suspended a series of tax increases to allow more time to explain a heavily criticized package of economic austerity measures to the public.

Kandil's efforts to revive the economy have been hit by the latest turmoil, which scared off tourists who had begun to return. On the eve of the anti-Mubarak revolt, Egypt's tourism industry accounted for one in eight jobs.

Mursi hoped that the passage of a new constitution would stabilize Egypt's politics, giving him space to implement economic reforms and attract investment. The constitution, written by Mursi's Islamist allies, was approved in a popular referendum in December.

But it remains the focus of controversy, and the opposition is likely to seize upon austerity measures demanded under an IMF deal as a stick to beat the Muslim Brotherhood ahead of a parliamentary vote expected in early 2013.

Two-fifths of Egypt's 84 million population live near the poverty line and depend on subsidies that are straining the treasury.

Gamal of Pyramid Oil Field said he knew of at least three foreign companies that were hesitant to make large investments in the country because of the instability.

"They are feeling insecure because of everything that is happening," he said. "One is looking to invest billions."

(Additional reporting by Tom Perry in Cairo and Tim Ahmann in Washington; Writing by Tom Perry and Patrick Werr; Editing by Giles Elgood and Maureen Bavdek)

TORONTO (Reuters) - Canada's main stock index rose on Monday, boosted by the materials sector as U.S. lawmakers pushed for a last-minute deal to avoid the "fiscal cliff".

Some $600 billion in tax hikes and spending cuts that could push the U.S. economy into recession are set to start coming into effect at midnight.

"Nobody really knows what's going to happen with the fiscal cliff," said David Baskin, president of Baskin Financial Services. "I'm seeing very light trading activity, so you could see some outside moves today simply because there isn't much volume going on."

At 10:55 a.m. (1555 GMT), the Toronto Stock Exchange's S&P/TSX composite index <.gsptse> was up 24.67 points, or 0.20 percent, at 12,340.79. The index was on track to end the year up about 3 percent.

"If you're a Canadian and you bought the index you got killed by the commodities this year," said Baskin. "You got whacked by the gold stocks."

Gold miners underperformed in 2012 as soaring operating and development costs cut into profits despite historically high gold prices.

Gold miners rose on Monday, however, as the price of the precious metal edged higher. Goldcorp Inc was one of the most influential gainers in the index, rising 1.3 percent to C$35.92.

Teck Resources Ltd , Canada's largest diversified miner, also pulled the index higher as upbeat Chinese manufacturing data boosted iron ore and copper prices. The stock was up 2.1 percent at C$35.81.

The heavyweight materials sector rose 1.1 percent overall. Financial stocks, which have been rising and falling with the perceived chances of a U.S. budget deal in recent weeks, were down 0.21 percent in volatile trading.

Canpotex Ltd, the offshore sales agency for Potash Corp of Saskatchewan , Mosaic Co and Agrium Inc said it struck a six-month agreement to supply a subsidiary of China's Sinofert Holdings Ltd . Potash Corp rose 0.9 percent to C$40.06, and Agrium was up 0.8 percent at C$98.58.

The Canadian Imperial Bank of Commerce said it would pay $149.5 million to the estate of Lehman Brothers Holdings Inc to resolve litigation over a collateralized debt obligation tied to the bankruptcy of the former Wall Street bank. Shares fell 1.0 percent to C$79.75, and CIBC was the most influential negative stock in the index.

(Editing by Kenneth Barry)