Markets Firmly Focused On Fiscal Cliff Negotiations
US Policy Makers are rapidly running out of time to reach an agreement on new legislation that is seen as vital for the global economic recovery.
The latest talk is of a potential compromise deal, but a failure to come to an agreement before the deadline on 1st January could potentially spook market participants and may bring additional volatility.
Republicans and Democrats have been in protracted negotiations for months now. Discussions are based around how they intend on stopping a trigger of costly tax rises, and associated spending cuts, which are said to be worth in excess of $500bn and would come into play in 2013.
Recent negotiations (on Sunday) are thought to be struggling on key issues including inheritance taxes and income thresholds associated with higher tax rates. President Barack Obama has already made an urgent appeal to Congress, to help him drive the US away from the so called "fiscal cliff", as both parties are caught in tense late negotiations. In the event that an agreement can't be reached today (Monday), senators may be given an opportunity to vote on a proposed fallback plan from President Obama.
A look at this recent S&P 500 technical analysis update reveals that index futures have been trading just above the 1380 – 1384 technical area in electronic trading today. This is a technical zone which marks a Fibonacci retracement and the previous daily lows from late November to date.
The fiscal cliff situation is being closely monitored by market participants as analysts are concerned that implementation of these measures could potentially push the US back into a recession and subsequently affect global growth prospects.