* U.S. budget talks to continue to fiscal cliff deadline
* World shares on course for 13 pct year gains
* Dollar, gold end 2012 with strong gains
By Marc Jones
LONDON, Dec 31 World shares were steady on
Monday, but set to end the year up 13 percent, as U.S.
politicians prepared for last-minute talks to avoid a fiscal
crunch of spending cuts and tax hikes that could drag down the
world economy in 2013.
In Washington, the two political parties are set to hold
further talks later to try and avoid the $600 billion "fiscal
cliff" kicking in from the start of January and which, if left
unchecked, could wipe around 4 percent off U.S. GDP.
Senate Majority Leader Harry Reid said the Senate would
reconvene at 11 a.m. Washington time (1600 GMT) to continue
discussions, but warned on Sunday there were still significant
differences between the two sides.
While hope has largely evaporated for any sort of broad deal
on Monday, a lack of panic on markets reflected expectations
that U.S. politicians will find a solution early in the New
Year. U.S. stock futures, notably, were up.
"It is still expected that a deal be reached in early
January. That will probably be greeted positively by markets,
but it looks like it will be a very short-term fix rather than
one that addresses the longer-term issues," said Bank of
Tokyo-Mitsubishi currency analyst Lee Hardman.
"The Treasury have said they could hold out until February
until they have to raise the debt ceiling, so going into next
year we are set for more of the same kind of political
After a subdued day in Asia, where Japan's Nikkei as well as
a number of other indexes had already shut for the year, limited
year-end European trading left the MSCI all-world index
steady at 336.97 ahead of the Wall Street open.
The pan-European FTSEurofirst 300 has risen roughly
13 percent this year, largely due to the European Central Bank's
vow to tackle the region's debt crisis, an d recovered from an
early morning dip to end the year at 1,131.64.
With the world's major central banks expect ed to keep
pumping stimulus into their economies at any sign of weakness,
most eco nomists forecast further steady gains in equities next
Euro zone bond markets were closed for the day on Monday
a fter a r ollercoaster y ear.
The debt of highly indebted Spain and Italy had looked set
to implode in the summer but has been rallying hard since July
when ECB President Mario Draghi's pl edged to ke ep the euro
In currency markets, the U.S. dollar last stood at 86.13 yen
, having retreated from Friday's high of 86.64 yen, which
was the greenback's strongest level against the Japanese
currency since August 2010.
As the year draws to a close, the dollar is up about 12
percent against the yen, putting it on track for its biggest
percentage gain since 2005.
With a new Japanese government led by Prime Minister Shinzo
Abe expected to pursue a policy mix of aggressive monetary
easing and heavy fiscal spending to beat deflation, analysts see
the yen staying under pressure in 2013.
The euro was down 0.16 percent on Monday at $1.3192
but is up 2 percent for the year. 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.
"The market seems to have almost taken into account the U.S.
fiscal cliff discussions will go into the new year, and
investors seem to have taken off any risk-on positions before
the holiday period," said Michael Sneyd, FX strategist at BNP
"If we come in on Wednesday and don't have a resolution I
don't think we will see a big risk-off move."
Commodities have been finding some recent support as
economic data in key emerging economies such as China have
started pointing to a gradual pick-up in the pace of growth in
Gold was $1,66 1 an ounce , up around 6 percent for the
year and on track for a 12th consecutive year of gains on
rock-bottom interest rates, concerns over the financial
stability of the euro zone, and diversification into bullion by
central banks. Copper also rose, shoring up this year's 5
Oil prices bucked the trend, however, slipping for a third
consecutive session, with failure to reach a solution in U.S.
budget talks seen likely to cause a serious slowdown in the
global economy and a large drop in fuel consumption.
Brent crude was down 40 cents at $110.22 a barrel.
It is up 2.8 percent and averaged more than $111.65 this year,
its fourth successive year of annual rises and above the
previous 2011 record of $110.91.
"Significant market moves are likely when the (U.S.) deal
gets done - or if no deal is done before the year-end ... In any
case, neither outcome is fully priced in," Jason Schenker,
president of U.S. consultancy Prestige Economics.