Starbucks is urging United States lawmakers to reach a
deal. Photo by Reuters.
Only a small glimmer of hope remains that the United
States economy will not topple over the so-called ''fiscal
cliff'' in the early hours of January 1.
The House of Representatives said it would come back to work
on Sunday, US time, to work on avoiding the fiscal cliff.
That was seen as the barest sign of progress, but enough for
US stocks to recover most of their losses from earlier in the
Senate Majority Harry Reid warned a deal was unlikely before
the deadline, causing US sharemarkets to fall 1% only to
rebound, merely on the news that the House would reconvene a
day before the ''cliff'' deadline.
The market has been prone to quick reactions to headlines and
those moves have sometimes seemed more dramatic because of
reduced trading volume. Investors are looking for any hint
that lawmakers will avert the $US600 billion ($NZ732 billion)
in tax hikes and spending cuts that will start to take effect
next week and could push the US economy into recession.
Adding to the tension, Treasury Secretary Timothy Geithner
formally notified Congress that the Government would hit its
statutory borrowing limit on Tuesday, raising anew the threat
of a federal default.
Mr Geithner announced the first of a series of measures that
should push back the date when the US Government would hit
its legal borrowing authority - a limit known as the debt
ceiling - by about two months. But he warned he did not know
how long the Treasury could shuffle accounts before the
Government could no longer pay its creditors.
In a sign of the anxiety, the Chicago Board Options Exchange
Volatility Index, or VIX, rose above 20 for the first time
since July, suggesting rising worries, but finished the day
down 0.4% as the stock market rebounded.
The four-day decline marked the S&P 500's longest losing
streak in three months. The index has lost 1.8% over the
period as investors grapple with the possibility that a deal
may not be reached until next year.
President Barack Obama arrived back in Washington from Hawaii
to restart stalled negotiations with Congress. House Speaker
John Boehner and other Republican leaders were to hold a
conference call with Republican lawmakers. The expectation
was that lawmakers would be told to get back to Washington
quickly if the Senate passed a Bill.
The Republicans are wearing the heat of most of the criticism
in the failure to do a deal but the right wing
representatives of the party appear more frightened of the
Tea Party in their home districts than the thought of another
Economic data seemed to confirm worries about the impact of
the fiscal cliff on the economy.
The Conference Board, an industry group, said its index of
consumer confidence in December fell to 65.1 as the budget
crisis dented growing optimism about the economy. The gauge
fell more than expected from 71.5 in November.
The job market continues to mend. Initial claims for
unemployment benefits dropped 12,000 to a seasonally adjusted
350,000 last week and the four-week moving average fell to
the lowest since March 2008.
Starbucks Corp plans using its ubiquitous coffee cups to tell
US lawmakers to come to a deal to avoid going over the fiscal
Chief executive Howard Schultz is urging workers in
Starbucks' 120-odd Washington area shops to write ''come
together'' on customers' cups as President Obama and
lawmakers return to work.
Whether members of Congress actually drink in the message is
another matter. While the concentration of Starbucks cafes is
high close to the White House, it is relatively low near the
US Capitol. Members of the House and Senate enjoy private
dining facilities and many of their offices have coffee
Mr Schultz said he had joined a growing list of high-powered
business leaders, politicians and financial experts in
endorsing the Campaign to Fix the Debt (www.fixthedebt.org), a well-funded
non-partisan group that is leaning on lawmakers to put the US
economy in order.
• House to meet Sunday (Monday, NZ time); Senate leader does
not see deal
• Consumer confidence hits four-month low on cliff
• If a deal is not reached, $US600 billion of tax hikes and
spending cuts start on January 1
• Dow, S&P 500 and Nasdaq all slip 0.1%
- Additional reporting Reuters