Shares fall as traders focus on US woes

World shares and the euro fell yesterday as traders turned their focus to the festering fiscal problems in the US and Europe after the re-election of President Barack Obama signalled no dramatic shift in US economic policies.

Jittery investors scrambled for less-risky assets, with benchmark US Treasuries poised for their best one-day move since May.

Concerns persisted whether Obama could reach a timely deal with Republican lawmakers to avert the “fiscal cliff” — the $600bn in automatic tax hikes and spending cuts set to kick in on Jan 1. Economists warned such a move would tip the world’s biggest economy into a recession.

“Unfortunately, the honeymoon doesn’t last very long in real time and we knew that regardless of the outcome of the election, our focus would immediately be shifted to the ‘fiscal cliff,’ which is going to be difficult in and ofitself,” said Art Hogan, managing director of Lazard Capital Markets in New York.

Traders also monitored the developments in Greece, where parliament was set to vote late last night on an austerity package needed to secure a fresh injection of EU/IMF aid and avert bankruptcy. There will be a follow-up vote on Sunday on an austerity budget for 2013.

Greece’s solvency is seen as vital in the support of the euro and the region’s economy, which has deteriorated due to slowing global demand and a battered banking system.

ECB president Mario Draghi said the ECB expects the eurozone economy to remain weak “in the near term” and eurozone governments must press ahead with efforts to forge closer financial, fiscal, economic and political union.

“A lot depends on this vote in Greece, so I think it is a little bit of wait and see,” said Mark Priest, head of index and equity market making at ETX Capital in London.

In early trading, the Dow Jones industrial average was down 240.30 points, or 1.81%, at 13,005.38. The Standard & Poor’s 500 Index was down 26.57 points.

— Reuters