Lack of progress in negotiations for a deal to avoid a U.S. budget crisis before a January deadline sent world stock markets lower on Wednesday.
President Barack Obama and U.S. lawmakers have until Jan. 1 to reach a deal to trim the country's unwieldy deficit. Otherwise, a series of automatic tax increases and sharp spending cuts will take effect that could drag the world's No. 1 economy into recession.
A high-ranking member of the U.S. Senate unnerved investors and sent Wall Street lower on Tuesday after expressing frustration over the budget impasse and the looming "fiscal cliff."
In early European trading, Britain's FTSE 100 fell 0.3 percent to 5,785.40 while Germany's DAX lost 0.2 percent to 7,320.92. France's CAC-40 fell 0.3 percent to 3,491.36.
Wall Street headed for a lower open, with Dow Jones industrial futures falling 0.1 percent to 12,845 and S&P 500 futures down 0.2 percent at 1,395.30.
Stock market losses began earlier in Asia. Japan's Nikkei 225 index fell 1.2 percent to close at 9,308.35, a day after closing at a seven-month high.
Obama plans to make a public case this week for his strategy as he pressures opposing lawmakers to allow tax increases on the wealthy while extending tax cuts for families earning $250,000 or less.
On Wall Street, reports released Tuesday showing increases in U.S. consumer confidence and orders for machinery and equipment failed to boost stocks significantly.
"If one could just take politicians and the fiscal cliff out of the picture, an optimistic outlook would be far easier to cobble together. There's been depressingly little news of cliff breakthroughs, or even developments, of late," said analysts at DBS Bank Ltd. in Singapore in an email commentary.
In Europe, sentiment improved this week after Greece's bailout creditors agreed to pay its next installment of loans and outlined a series of measures to lower its debt load over the coming decade. Concerns remain, however, over the country's economy, which is expected to enter a sixth year of recession in 2013 and the government's ability to implement its reforms.
Elsewhere, South Korea's Kospi shed 0.7 percent to 1,912.78 and Australia's S&P/ASX 200 lost 0.2 percent to 4,447.30. Hong Kong's Hang Seng fell 0.6 percent to 21,708.98.
Mainland China's Shanghai Composite Index fell 0.9 percent to 1,973.52, a four-year low. The smaller Shenzhen Composite Index tumbled 1.9 percent to 750.97.
Benchmark oil for January delivery was down 38 cents to $86.80 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 56 cents to finish at $87.18 per barrel on the Nymex on Tuesday.
In currencies, the euro fell to $1.2909 from $1.2939 on Tuesday in New York. The dollar fell to 81.86 yen from 82.17 yen.
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