US markets slip amid budget deadlock

The US markets dropped on Thursday, halting a six-day rally in the Standard & Poor’s 500 Index, as politicians bickered in public over their difficulties in reaching a deal to avert recession-inducing spending cuts and tax hikes in the new year overshadowing a drop in jobless claims and growth in retail sales numbers. House Speaker John Boehner called a news conference to air his views on what is blocking negotiations to avoid the fiscal cliff, with the Ohio Republican blasting President Barack Obama and Democrats for looking to punish small businesses with higher tax rates. House Speaker John Boehner pressed the White House for spending-cut proposals, resisting a request to give President Barack Obama unlimited authority to increase the debt ceiling. The news conference from the top Republican negotiator indicated that significant differences remain between the two parties over crafting a deal to avert the fiscal cliff - the series of tax hikes and spending cuts amounting to at least $500 billion that will hit the US economy starting next year.

Besides, the US Federal Reserve and other major central banks moved to keep pressures out of financial markets by keeping in place measures designed to make it easy for foreign banks to obtain dollar funding. The Fed, the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank stated that they were extending an existing temporary US dollar liquidity swap arrangement for another year, through February 01, 2014. Without the action, the swap arrangement would have expired on February 01, 2013. The banks are also extending, for another year, temporary bilateral liquidity arrangements that would allow the banks to provide liquidity in any currency if needed. On the economy front, the number of people who applied for new US unemployment benefits last week fell below pre-Sandy levels and hovered near a four-year low. Initial jobless claims declined by 29,000 to a seasonally adjusted 343,000 in the week ended December 08, the Labor Department stated. Claims from two weeks ago were revised upward to 372,000 from 370,000. Also, US retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, were $412.4 billion, an increase of 0.3% from the previous month and 3.7% above November 2011. Retail trade sales rose 0.2% from October and 3.4% above last year. Non-store retailers were up 11.1% from November 2011. Separately, the US producer price index fell 0.8% in November following a 0.2% decline in October, according to the Labor Department report released, driven by a sharp drop in energy prices, which fell 4.6% in November.

In Europe, the European Union leaders approved a long sought banking union that will streamline and standardize procedures in the euro zone across banking system and prevent future national debt crisis that affects the common currency. At least 150 large and multinational banks will be placed under a single supervisory authority controlled by the European Central Bank and if needed the new authority will be empowered to monitor all 6,000 banks in the region. UK and Sweden will not be part of the union. European leaders are meeting for the last time this year and the agreement will now need approval from the European Parliament and German and other lawmakers. The single authority will be operational next April and will be fully functional in 2014. Besides, the Euro group formally approved the second disbursement for Greece after reviewing the outcome of the debt buy back operation conducted by the government. The Euro group authorized the European Financial Stability Facility to release the next installment for a total amount of €49.1 billion.

The Dow Jones Industrial Average lost 74.73 points or 0.56 percent, to close at 13,170.70, the S&P 500 declined by 9.03 points or 0.63 percent, to finish at 1,419.45, while the Nasdaq fell by 21.65 points or 0.72 percent, to end at 2,992.16.

Indian ADRs closed mostly in red on Thursday, Infosys was down 1.03%, Dr. Reddy’s Lab was down 0.41%, ICICI Bank was down 0.30% and Sterlite Industries was down 0.29%. On the other hand, MTNL was up 0.01%.