U.S. Futures Pare Dec. 28 Drop, Oil Falls on Cliff Talks Impasse

U.S. Futures Pare Dec. 28 Drop, Oil Falls on Cliff Talks Impasse
By Adam Haigh - Dec 31, 2012 7:46 AM GMT+0800

U.S. stock-index futures rose, paring a drop from after the Standard & Poor’s 500 Index closed Dec. 28, with a deadline looming for Congress to reach a budget agreement before the so-called fiscal cliff takes effect.
S&P 500 futures gained 0.4 percent as of 8:44 a.m. in Tokyo. Australia’s S&P/ASX 200 Index lost 0.6 percent and New Zealand’s Exchange 50 Gross Index (NZSE50FG) retreated 0.3 percent. Crude dropped 0.3 percent. Japan’s equity and bond markets are closed today for a holiday.

Senate Majority Leader Harry Reid rejected the latest Republican offer to resolve the U.S. fiscal crisis as Minority Leader Mitch McConnell reached out to Vice President Joe Biden in an effort to break the impasse. Congress is working to avert more than $600 billion in tax increases and federal spending cuts, the so-called fiscal cliff, set to start taking effect tomorrow. The Senate will resume its session today at 11 a.m. Washington time and “perhaps” have further announcements then, said Reid.
“Some investors are looking through this in the hope that politicians can find a middle ground that will allow the increasing momentum in the economy not to be impeded,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne, in a phone interview today. “We’re in a period of frenetic negotiations. It’s disappointing that politics has got in the way to such an extent, with investors becoming increasingly nervous that this will drag on into the new year.”
Chinese manufacturing may have improved this month, according to a survey before the scheduled release of HSBC Holdings Plc’s Purchasing Managers Index due today. The PMI may climb to 50.9 from 50.5, the survey showed. The number of 50 divides expansion and contraction.
The S&P 500 index slipped 1.9 percent last week amid concerns lawmakers weren’t making progress on a budget deal. The S&P 500 has fallen 4.3 percent after reaching the highest level since 2007 in September as Obama’s re-election set up a budget showdown with the Republican-controlled House of Representatives. The gauge is still up 12 percent for 2012.
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