A currency trader reacts to stock prices at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul Thursday. Photo by Ahn Young-joon, AP
LONDON (AP) - Uncertainty over whether Washington will agree a spending and taxation deal that is crucial to keeping the U.S. economic recovery on track kept a lid on global market gains on Monday.
Economists have said the U.S. risks slipping into recession if hundreds of billions of dollars in expiring tax cuts and automatic spending reductions take effect on Jan. 1 - the so called "fiscal cliff." Congress and the White House must find a compromise to prevent a big hit to the world's biggest economy.
President Obama, fresh from a re-election victory, and House Speaker John Boehner have spoken of compromise but appear to be taking a firm stances on some issues, including whether to raise taxes for the wealthiest.
"Despite comments from the U.S. administration and Congressional leaders of a willingness to compromise, markets remain unconvinced," said Mitul Kotecha, analyst at Credit Agricole CIB.
European stocks lacked momentum in morning trading. Britain's FTSE 100 was up 0.2% to 5,778.73 while Germany's DAX edged up by the same rate to 7,174.53. France's CAC-40 lost 0.2% to 3,417.64.
Wall Street was expected to make modest gains on the open - Dow futures were 0.2% higher at 12,785 while the S&P 500 was up the same rate at 1,378.60.
In Europe, investors will keep their eyes on a meeting of the finance ministers of the 17-country eurozone. The officials are expected to discuss Greece's economy and its bailout program.
Greece is waiting for approval of the next $40 billion payout of its bailout loan. It faces a bond repayment on Friday it cannot afford.
The finance ministers will only decide on the payout of that money after they receive a report on Greece by international debt inspectors. But Germany's finance minister has said the report would likely not be delivered in time for Monday's meeting.
In any event, no decision on giving Greece the new loans will be made Monday because some eurozone parliaments must approve the deal. Greek lawmakers approved the country's 2013 austerity budget early Monday, essential to unblocking the new payment.