GLOBAL MARKETS-US stocks cut most losses; yen hits two-yr low

Thu Dec 27, 2012 5:06pm EST

* U.S. stocks cut losses late as Congress to convene Sunday
    * Brent settles down slightly; U.S. bond prices up
    * Yen hits more than 2-year low as monetary easing eyed


    By Caroline Valetkevitch
    NEW YORK, Dec 27 (Reuters) - U.S. stocks recovered from
sharp losses to end only slightly lower on Thursday after the
U.S. House of Representative said it would come back to work
this weekend in a last-ditch effort to avoid the "fiscal cliff,"
while the yen hit a two-year low on expectations of bold
monetary stimulus in Japan.
    It was a fourth straight session of losses for U.S. stocks,
while world stocks ended slightly higher.
    Wall Street stocks tumbled in morning trade after Senate
Majority Leader Harry Reid, the top Senate Democrat, said the
United States may be poised to go off the "fiscal cliff." But in
late trading, the House of Representatives said it set a work
session for Sunday night ahead of the Dec. 31 deadline for
reaching a deal, paring losses that earlier that earlier had
driven all three major stock indexes down about 1 percent.
 
    Economists warn that the $600 billion in higher taxes and
spending cuts set to kick in from January could push the world's
largest economy into recession, dragging other countries with
it.
    "There's no conviction in the move or the overall market,
based on the across-the-board reduction we've seen in volume ...
but there will be continued weakness until there's sustained
positive direction coming from our leaders," said Joseph
Cangemi, managing director at ConvergEx Group, in New York. 
    The House of Representatives may stay in session until Jan.
2, the final day of the current Congress, according to a Twitter
message from House Majority Leader Eric Cantor. 
   That is the day that another component of the "fiscal cliff"
- $109 billion in automatic spending cuts to military and
domestic programs - is set to start. 
    The Dow Jones industrial average dipped 18.28 points,
or 0.14 percent, to end at 13,096.31. The Standard & Poor's 500
Index was down 1.74 points, or 0.12 percent, at 1,418.09.
The Nasdaq Composite Index was down 4.25 points, or 0.14
percent, at 2,985.91.
    Shares of U.S. retailers fell for a second day following the
Christmas holiday. The Morgan Stanley retail index was
down 0.2 percent. 
    The MSCI global index was last up 0.1
percent, while European shares ended down 0.01 percent.
     President Barack Obama returned to Washington on Thursday,
cutting short his holiday to try to get a budget deal with
Republican lawmakers.  
  
    
    EURO DIPS, YEN SLUMPS
    The dollar rose to 86.15 yen on Reuters data, its
highest since mid-August 2010. It was last up 0.5 percent at
86.02 yen. 
     The dollar has risen 12 percent against the yen in 2012, on
track for its biggest annual gain since 2005. Yen selling has
accelerated in the past two months on expectations that Shinzo
Abe would be elected prime minister and would pursue policies to
weaken the Japanese currency.
    The Liberal Democratic Party won the elections on Dec. 16,
making Abe the prime minister. Since then, he has kept up
pressure on the Bank of Japan to attack deflation and weaken the
yen.
    "If everyone is simply going to take Mr. Abe at his word,
then we can go a lot further before this move is done," said Kit
Juckes, strategist at Societe Generale in London.
     The euro rose 0.2 percent to $1.3242.
     
    U.S. BONDS TRADE HIGHER, OIL EASES
    Prices on longer-dated U.S. Treasuries were higher after
Reid's fiscal cliff comments and after the Conference Board, an
industry group, reported a bigger-than-expected drop in American
consumer confidence in December.
    Benchmark 10-year Treasuries prices were 4/32
higher in price, yielding 1.7355 percent.  
    Brent crude futures ended down slightly as the unresolved
U.S. budget talks left open the possibility that mandated tax
hikes and spending cuts could be enacted, which could push the
United States, the world's top oil-consumer, into recession. 
    Brent February crude fell 27 cents, or 0.24 percent,
to settle at $110.80 a barrel. U.S. February crude 
slipped 11 cents, or 0.12 percent, to settle at $90.87.
    In the precious metals market, gold prices rose for a fourth
straight day for their longest winning stretch in nearly two
months. But the gains were small for a market seen as a key
hedge to the U.S. fiscal crisis.
    Gold's February futures contract on COMEX, the most
active on the New York exchange, settled at $1,663.70 an ounce,
up $3, or 0.2 percent on the day. Over the past week, it has
gained $17.80, or just over 1 percent, after hitting a
four-month low of $1,645.90 on Dec. 20.
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