Stocks tumble amid fears for US

Asian stocks tumbled today as hopes began to fade for a quick agreement among US leaders to avoid a “fiscal cliff” that could derail the world’s biggest economy.

Unless President Barack Obama and Congress reach a compromise, a series of expiring tax cuts and across-the-board spending reductions will take effect in 2013 – at a cost of about 800 billion US dollars.

Economists say that could knock the US economy back into recession.

Hong Kong’s Hang Seng fell 1.1% to 21,216.40. South Korea’s Kospi shed 1.6% to 1,863.16. Australia’s S&P/ASX 200 fell 1.1% to 4,341.60. Benchmarks in Singapore, Taiwan and mainland China also fell.

Analysts at Credit Agricole CIB said in a market commentary that a “cautious tone” is likely to permeate trading, given the uncertainty over the situation in the US Mr Obama is expected to meet the top leaders of both political parties at the White House tomorrow for discussions.

Meanwhile, a weakening yen helped keep Japanese stocks buoyant. The Nikkei 225 index rose 0.8% to 8,733.86.

Investors remain unnerved after demonstrations in Europe by workers who are protesting the austerity measures that governments have been imposing to reduce public debt.

On top of that, official figures showed industrial output among the 17 countries that use the euro dropped 2.5% on the month in September, worse than analysts had expected. Figures are expected to confirm that the eurozone is in recession.