Market update: Stocks and commodities struggle on fiscal cliff and US economic recovery concerns

Last week’s gains on Wall Street came to a halt on Monday (Dow Jones and S&P 500 indices both down 0.5%). Stocks struggled with an unexpected contraction in US manufacturing activity: the Institute for Supply Management index fell to 49.5 in November, the lowest level in three years, while continued haggling over a budget compromise dampened risk appetite as the White House rejected a counter proposal by the Republicans.

Worries over the strength of recovery in the US and fiscal cliff concerns affected Asian bourses overnight, which were mostly down. In a contrarian move, Chinese stocks that have lagged other markets recently, closed in positive territory (Shanghai 0.3%) with insurers leading the gains. In early European trade, stocks were struggling to move higher (FTSE Eurofirst 300 0.2%, FTSE 100 flat). A sense of easing tensions in the eurozone is seemingly helping the mood; Europe has agreed on €39.5 billion of aid for Spanish banks and there is optimism over Greece’s plan to buy back some of its debt. The euro was hovering near six-week highs earlier this morning.