World stock markets faced resistance Thursday after talks turned sour among U.S. political leaders trying to reach an agreement over how to avert an economically disastrous "fiscal cliff" before the end of the year, AP reported.
A downturn in U.S. housing starts also hurt sentiment.
Negotiations between President Barack Obama and Republicans in Congress descended into acrimony Wednesday after the White House threatened to veto House Speaker John Boehner's alternative tax plan as the Jan. 1 deadline to avoid sweeping tax increases and government spending cuts draws closer.
Those changes - at a cost of hundreds of billions of dollars - take effect automatically without a deal and have the potential to throw the U.S. economy back into recession. With only two weeks to go before the deadline, markets were "likely to become more nervous by the day," said Mitul Kotecha of Credit Agricole CIB in Hong Kong.
"The market is reacting to comments and conjecture," he added. "But the overall trend is of improving risk appetite, so there is an overall belief that there will be a resolution. The big issue is how quickly will that come."
European stocks were lower in early trading. Britain's FTSE 100 fell marginally to 5,959.19. Germany's DAX fell 0.1 percent to 7,658.15. France's CAC-40 shed 0.1 percent at 3,661.45. Wall Street stocks were lower ahead of the opening bell. Dow Jones industrial futures fell 0.1 percent to 13,205 while S&P 500 futures were 0.1 percent lower at 1,431.30.
Stocks in Asia were mixed. Japan's Nikkei 225 index fell 1.2 percent to close at 10,039.33, with investors locking in gains following a strong rally the day before. The Bank of Japan, as expected at the end of a two-day policy meeting, announced it was expanding its asset-purchase program by about 10 trillion yen ($119 billion) to shore up its flagging economy.
Hong Kong's Hang Seng rose 0.2 percent to 22,659.78. Australia's S&P/ASX 200 gained 0.4 percent to 4,634.10. Stocks in mainland China and Singapore rose while benchmarks in Taiwan, Indonesia and Thailand fell.
South Korea's Kospi rose 0.3 percent to 1,999.50, a day after the country elected Park Geun-hye as its first female president. She has pledged to curb the power of family-controlled business conglomerates but has warned against excessive regulations, Yonhap News Agency said.