Hours from "fiscal cliff," Washington still awaits deal

(Reuters) - The U.S. Congress comes back on Monday without a deal to avert the "fiscal cliff" and only a few hours of actual legislative time scheduled in which to act if an agreement materializes.

Negotiations involving Vice President Joe Biden and Senate Republican leader Mitch McConnell appeared to offer the last hope for avoiding the across-the-board tax increases and draconian cuts in the federal budget that will be triggered at the start of the New Year because of a deficit-reduction law enacted in August, 2011.

A jolt from the financial markets could also prod the parties, as it has occasionally in the past.

"I believe investors will show their displeasure" at the lack of progress in Washington, said Mohannad Aama, managing director at Beam Capital Management, an investment advisory firm in New York.

Democratic and Republican leaders in the Senate had hoped to clear the way for swift action on Sunday. But with the two sides still at loggerheads in talks, Senate Democratic leader Harry Reid postponed any possible votes and the Senate adjourned until Monday.

The main sticking point between Republicans and Democrats remained whether to extend existing tax rates for everyone, as Republicans want, or just for those earning below $250,000 to $400,000, as Democrats have proposed.

Also at issue were Republican demands for larger cuts in spending than those offered by President Barack Obama.

Hopes for a "grand bargain" of deficit-reduction measures vanished weeks ago as talks stalled.

While Congress has the capacity to move swiftly when motivated, the leaders of the U.S. House of Representatives and the Senate have left themselves little time for what could be a complicated day of procedural maneuvering in the event of an agreement.

House Speaker John Boehner has insisted that the Senate act first, but that chamber does not begin legislative business until about noon Monday.

OTHER BUSINESS ALSO ON AGENDA

And the cliff is not the only business on the House agenda. Farm-state lawmakers are seeking a one-year extension of the expiring U.S. farm law to head off a possible doubling of retail milk prices to $7 or more a gallon in early 2013.

Relief for victims of Superstorm Sandy is waiting in line in the House as well, though it could still consider a Senate bill on assistance for the storm until January 2, the last day of the Congress that was elected in November 2010.

Expiring along with low tax rates at midnight Monday are a raft of other tax measures effecting tens of millions of Americans.

A payroll tax holiday Americans have enjoyed for two years looks like the most certain casualty as neither Republicans or Democrats have shown much interest in continuing it, in part because the tax funds the Social Security retirement program.

The current 4.2 percent payroll tax rate paid by about 160 million workers will revert to the previous 6.2 percent rate after December 31, and will be the most immediate hit to taxpayers.

A "patch" for the Alternative Minimum Tax that would prevent millions of middle-class Americans from being taxed as if they were rich, could go over the cliff as well. Both Republicans and Democrats support doing another patch, but have not approved one.

At best, the Internal Revenue Service has warned that as many as 100 million taxpayers could face refund delays without an AMT fix. At worst, they could face higher taxes unless Congress comes back with a retroactive fix.

After Tuesday, Congress could move for retroactive relief on any or all of the tax and spending issues. But that would require compromises that Republicans and Democrats have been unwilling to make so far.

Obama said on Sunday he plans on pushing legislation as soon as January 4 to reverse the tax hikes for all but the wealthy.

Finance Ministry to take call on IKEA's FDI proposal tomorrow

NEW DELHI: Government is likely to clear IKEA's proposal to open cafeterias at its proposed mega retail outlets when the Foreign Investment Promotion Board(FIPB) reviews the Swedish furniture major's request tomorrow. 

The FIPB, headed by Economic Affairs SecretaryArvind Mayaram, has already allowed IKEA to invest Rs 4,200 crore to undertake single brand retailing of its products. 

Following a representation from the Swedish firm, theDepartment of Industrial Policy and Promotion (DIPP) had recently forwarded a request to FIPB for reviewing its November 20 decision giving only part approval to IKEA's plan. 

"Review the request of DIPP" regarding IKEA is on the FIPB agenda, sources said. 

Batting for IKEA's proposal, Commerce and Industry Minister Anand Sharma had recently said that government has taken a favourable view on IKEA's request. "All the stores globally whether IKEA or some other single brand retailers, where people shop for long time... There are cafeterias inside. 

"The government has taken...note of the representation that IKEA has made in this regard and a favourable view has been taken so that we accept their global model and the process of FIPB's formal approval is currently underway," he had said. 

Sources said that besides furniture, the Scandinavian firm in its original application had sought government approval to sell items such as textile products, consumer electronics, leather products, lifestyle products, and food and beverages to be served at its restaurants and cafe. 

The company had envisaged an investment of Rs 10,500 crore in single brand retail trading after India allowed 100 per cent FDI in the segment. 

IKEA, the world's largest furniture retailer, operates 336 stores in 44 countries. It plans to set up 10 furnishing and homeware stores as well as allied infrastructure over 10 years in India. Subsequently, it plans to open 15 more stores.

Obama Puts Pressure on GOP in Cliff Talks

WASHINGTON—President Barack Obama sought to increase pressure on Congressional Republicans by attempting to hold them responsible if talks to prevent the so-called fiscal cliff collapse.

Mr. Obama, in an appearance on NBC's "Meet the Press," which was taped Saturday, cast himself as a reasonable broker prepared to make concessions, while depicting GOP leaders as unwilling to let taxes rise on the wealthiest Americans. Many in the GOP make the opposite case, blaming the budget impasse on Democrats, who are blocking any change to the nation's costly entitlement programs.

The president sounded uncertain whether Congress would pass legislation by year's end ...

Global stocks drop, dollar up as "cliff" deadline looms

(Reuters) - World stocks declined, the dollar gained and U.S. shares fell for a fifth day on Friday as the White House and U.S. lawmakers closed in on the "fiscal cliff" deadline with no deal in place.

President Barack Obama and Democratic and Republican lawmakers met Friday as they faced just days to reach a budget deal to avert massive tax increases and spending cuts that could drag the U.S. economy, the world's biggest, into recession.

The two sides are attempting to smooth over sharp differences on raising taxes on the wealthiest Americans and cutting spending on politically sensitive social welfare programs such as Medicare and Medicaid. But investors were skeptical that a deal could be accomplished before the deadline.

The MSCI all-world share index .MIWD00000PUS was down 0.5 percent, and the pan-European FTSEurofirst 300 .FTEU3 ended down 0.6 percent.

In U.S. trading, the Standard & Poor's 500 Index .SPX was down 15.67 points, or 1.11 percent, at 1,402.43, marking a fifth straight decline for the longest losing streak in three months.

The Dow Jones industrial average .DJI was down 158.20 points, or 1.21 percent, at 12,938.11, while the Nasdaq Composite Index .IXIC was down 25.59 points, or 0.86 percent, at 2,960.31.

"There's a pretty good chance that we won't have something in hand by year-end," said Jonathan Golub, chief U.S. equity strategist at UBS, in New York. "It should be pretty obvious that that is now the majority case."

Golub, however, said investors were still counting on a deal that would avoid most of the tax hikes and spending cuts next year even if it does come after the deadline.

Allowing $600 billion of higher taxes and spending cuts to start in January would prevent U.S. debt spilling beyond a $16.4 trillion agreed limit. Analysts fear the measures could wipe as much as 4 percent off the country's growth rate.

Energy companies were among the biggest decliners on Wall Street, with shares of Exxon Mobil (XOM.N) down 2 percent at $85.10 and the S&P energy index .GSPE leading sector losses.

DOLLAR RISES

The U.S. dollar edged up to a two-week high against major currencies as investors waited to see if U.S. politicians can strike a last-minute budget deal.

"Headline risk is likely to remain a driver of FX markets in the near term," said Eric Theoret, FX strategist at Scotia Capital in Toronto.

An agreement on the U.S. budget would be viewed as positive for riskier currencies such as the euro and Australian dollar, while a deadlock is deemed positive for the safe-haven and highly liquid dollar.

Against a basket of currencies at 79.930, the dollar was last up 0.1 percent at 79.665 .DXY.

At the same time, expectations that Japan will inject new stimulus into its economy pushed the yen to yet another two-year low for a third straight day.

The dollar was steady against the yen at 86.06 yen, having earlier risen to 86.63 yen, its strongest since August 2010.

In the U.S. bond market, benchmark Treasury debt prices rose for a third consecutive session on safe-haven buying as the faded hopes for a deal on the fiscal cliff.

Benchmark 10-year notes traded 12/32 higher in price, with yields falling to 1.69 percent, marking the lowest in two weeks and down from 1.73 percent late Thursday. Benchmark notes posted their biggest daily dip in yield in over seven weeks and were down about 8 basis points on the week.

OIL EASES

U.S. February crude slipped 7 cents, or 0.08 percent, to settle at $90.80. Trade was choppy, awaiting news on the U.S. budget talks, but the market was pressured by data showing that fuel stockpiles rose sharply and crude stocks fell less than expected last week.

Brent February crude fell 18 cents, or 0.16 percent, to settle at $110.62.

In other commodity markets, U.S. gold futures for February delivery settled down $7.80, or 0.5 percent, at $1,655.90 an ounce in New York.

Traditionally a safe haven and inflation hedge that investors rush to in times of trouble, gold has lately behaved like a risk asset - often rising and falling with the stock market and sometimes following the dollar.

Obama: Congress must meet fiscal cliff deadline

President Obama used his Saturday radio address toecho his demand that Congress act before the nation falls off a "fiscal cliff" that includes automatic tax hikes and budget cuts.

"You meet your deadlines and your responsibilities every day," Obama told his radio audience. "The folks you sent here to serve should do the same. We cannot let Washington politics get in the way of America's progress."

Obama spoke as Senate Democratic and Republican leaders work this weekend on a package that could be voted on as early as Monday. Any plan must also approved by the Republican-run House.

Tuesday, New Year's Day, marks the start of the fiscal cliff, a series of automatic tax increases and program cuts -- including defense -- that gradually take effect if the parties are unable to reach a new debt reduction agreement. The federal debt now exceeds $16 trillion.

If the Senate cannot strike a deal this weekend, Obama said in his radio speech he will ask the Senate to vote on a "basic package." That plan would maintain unemployment benefits and extend the George W. Bush-era tax cuts for all Americans except those who make more than $250,000 a year.

"I believe such a proposal could pass both houses with bipartisan majorities -- as long as these leaders allow it to come to a vote," Obama said. "If they still want to vote no, and let this tax hike hit the middle class, that's their prerogative. But they should let everyone vote."

In the Republican radio address, Sen. Roy Blunt, R-Mo., said the GOP wants to make sure that a debt reduction doesn't include tax increases that could hurt the economy.

"We still can avoid going over the fiscal cliff if the President and the Democrat-controlled Senate step forward this week and work with Republicans to solve this problem and solve it now," Blunt said.

Senate Majority Leader Harry Reid, D-Nev., and GOP counterpart Mitch McConnell, R-Ky., said they hope to have a plan ready when the Senate and House reconvene Sunday -- two days before New Year's Day and the fiscal cliff deadline. Reid hopes to have a vote on Monday.