An employee of a foreign exchange trading company looks at monitors as a television set shows Japan's incoming Prime Minister and the leader of Liberal Democratic Party (LDP) Shinzo Abe speaking in Tokyo

World stocks fall after Reid “cliff” comments; yen down

by Caroline Valetkevitch,  |  published on December 28, 2012

World stocks slipped on Thursday after comments from the U.S. Senate majority leader that the economy may be poised to go off the “fiscal cliff,” while the yen hit a two-year low on expectations of aggressive monetary stimulus.

Democrat Harry Reid criticized Republicans for refusing to go along with any tax increases as part of a U.S. budget remedy and said the economy seemed to be heading over the “fiscal cliff” of impending tax hikes and spending cuts.

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.

U.S. stocks fell to session lows after Reid’s comment, while world stocks dipped into negative territory.

On Wall Street, the Dow Jones industrial average .DJI was down 105.04 points, or 0.80 percent, at 13,009.55. The Standard & Poor’s 500 Index .SPX was down 13.70 points, or 0.96 percent, at 1,406.13. The Nasdaq Composite Index .IXIC was down 29.35 points, or 0.98 percent, at 2,960.80.

Shares of U.S. retailers fell for a second day following the Christmas holiday. The Morgan Stanley retail index .MVR was down 1.5 percent while the SPDR S&P Retail Trust (XRT.P) lost 1.3 percent.

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