Debt Talks of Spain, Greece and U.S. Fiscal Cliff Worry G 20

Arthi Gupta
05 Nov, 2012
New York City

The European indexes edged lower ahead of the U.S. presidential election and Communist Party meeting this week in China. The euro edged higher and resources stocks and banks were under pressure.

[R]2:30 PM Frankfurt – The European indexes edged lower ahead of the U.S. presidential election and Communist Party meeting this week in China. The euro edged higher and resources stocks and banks were under pressure.[/R]

The European indexes declined ahead of the U.S. presidential elections on Tuesday and the meeting of China''s Communist Party this week.

G20 finance ministers and central bankers are meeting in Mexico City to discuss world economy and the leaders pressed the U.S. delegates to resolve the fast approaching fiscal cliff.

In the final communiqué scheduled to be released after the talks end on Monday, the leaders are looking for details on the fiscal cliff in the U.S., speedy resolution on the bailout debt negotiations for Spain and Greece in the euro zone and a quick resolution to the deficit financing bonds in Japan.

The U.S. is poised for sharp spending cuts after the election as the nation battles record debt and anemic economic recovery and more than 12 million people are actively looking for a job. The out of control defense spending and the cost of bailout of banks have driven the federal government debt over $16 trillion.

From January 1, after the election, the U.S. is set to cut $600 billion spending and increase taxes unless the divided Congress can reach a deal.

Separately, in China there is growing speculation that the mantle of power may be transferred from the present President Hu Jintao to Vice President Xi Jinping and the announcement is likely to be made on Thursday.

Closer to the region, Greek Prime Minister Antonis Samaras will have to garner support for the austerity measures from his coalition partners this week to receive the next tranche of the bailout money from the troika.

However, there is a lack of consensus among the political parties on the new austerity measures demanded by the troika.

In Paris trading, the CAC-40 Index dipped 31.65 or 0.9% to 3,460.88 and in Frankfurt the DAX Index edged lower 44.35 or 0.6% to 7,319.50.

The yields on Spain’s benchmark 10-year climbed seven basis points to 5.73%. Italian 10-year yield rose five basis points to 5%.

Euro zone confidence improved in November for the third time in a row according to the data released by Sentix showed today.

The composite index for the euro zone improved to -18.8 in November from -22.2 in October.

But Spanish unemployment rose 2.73% or by 128,242 people on a monthly basis to 4.83 million in October.