US Congressional leaders are continuing to work on a 'stop-gap' budget deal in negotiations which have continued over the weekend.
Meanwhile, in economic news, US pending home sales rose 1.7 per cent in November (beating a consensus of 1 per cent), while the Chicago PMI rose from 50.4 to 51.6 in December (against a consensus of 51).
European shares closed lower on Friday as investors sought to book profits and square positions ahead of US budget talks between Congressional leaders and the White House. Eight European markets also had their last day of trade for 2012. The benchmark FTSEurofirst 300 index fell by 0.6 per cent, and fell a similar margin over the week. The UK FTSE was down by 0.5 per cent on Friday and the German Dax was lower by 0.6 per cent. And miners posted losses on Friday, with Rio Tinto down 0.2 per cent in London trade while BHP Billiton lost 0.6 per cent.
US sharemarkets slumped on Friday on rumours that President Obama had no fresh proposals to advance to Congressional leaders for weekend budget talks. The Dow Jones fell by 158 points, or 1.2 per cent, with the S&P 500 lower by 1.1 per cent while the Nasdaq eased 25.6 points or 0.9 per cent. For the week, the Dow and S&P 500 fell 1.9 per cent and the Nasdaq lost 2 per cent.
US treasuries rose on Friday (yields lower) as investors embraced safe-haven assets ahead of weekend budget negotiations. US 2-year yields fell by 2 points to 0.25 per cent and US 10-year yields fell 4 points to 1.7 per cent. Over the week, US 2-year yields fell by 2 points while US 10-year yields fell by almost 7 points.
The euro and commodity currencies eased against the US dollar in European and US trade on Friday, with the Japanese yen stronger as investors and traders awaited developments on US budget talks. The Euro eased from near $US1.3255 to $US1.3165, and was around $US1.3215 at the US close. The Australian dollar eased from highs near 103.95 cents to 103.60 cents and was near 103.75 cents at the US close. And the Japanese yen lifted from ¥86.46 per US dollar to ¥85.95 and was at ¥86.01 at the US close.
World crude oil prices eased on Friday as investors squared positions ahead of weekend US budget negotiations. While US economic data was solid, gasoline stocks rose more than expected last week. Brent crude fell by US18 cents to $US110.62 and Nymex crude fell by US7 cents to $US90.80 a barrel. Over the week Brent rose by 1.5 per cent and Nymex rose by 2.4 per cent.
Base metal prices eased on the London Metals Exchange on Friday. While metal prices generally lost up to 0.7 per cent, zinc slid by 2.5 per cent. Over the week metals were mixed with copper, lead and zinc up by as much as 1.4 per cent but other metals fell by up to 0.9 per cent. The gold price fell on Friday, with the Comex gold futures price down by $7.80 or 0.5 per cent to $US1,655.90 per ounce. Over the week gold fell by 0.2 per cent. But the spot iron ore price was unchanged on Friday at $US139.40 a tonne to be up $4.00 over the week.
Looking to the day ahead, in Australia, APRA banking statistics are released. In the US, the Dallas Federal Reserve manufacturing index is released.
SCOREBOARD: Deadline threat
Markets remained fixated on US budget talks over the weekend, as investors sought safe havens.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free