Market enthusiasm over Fed stimulus fades

LONDON (AP) -- Upbeat U.S. economic figures failed to restore strength to stock markets Thursday as investors monitored the progress of budget discussions in the U.S.

On Wednesday, stocks had gained ground on hopes of another monetary stimulus from the Federal Reserve, but once it was delivered investors refrained from any further buying.

"As we've seen on numerous occasions recently, the move was already priced into the markets which meant that shortly after the initial spike, prices fell back to their previous levels as traders took profits on their positions," said Craig Erlam, market analyst at Alpari.

In Europe, markets barely reacted to news that European Union finance ministers had agreed to create a banking supervisor and that Greece has finally been approved to get more bailout cash to avoid bankruptcy. The euro was flat at $1.3070 even though the measures are intended to secure its future.

In stock markets, the FTSE 100 index of leading British shares closed the day down 0.3 percent at 5,929 while Germany's DAX fell 0.4 percent to 7,581. The CAC-40 in France was off steady 0.1 percent at 3,643.

In the U.S., solid retail sales and jobless claims data did little to jolt investors out of their sloth. The Dow Jones industrial average was down 0.4 percent at 13,189 while the broader S&P 500 index was off 0.57 percent at 1,420.

The focus in the U.S. will likely remain on the progress of budget discussions between the White House and Congress, which must be agreed by the end of this year to avoid the so-called "fiscal cliff." Without a deal, automatic spending cuts and tax increases could push the world's largest economy back into recession.

Though a deal is expected to be agreed in time to avoid the fiscal cliff, time is running out and some investors are cashing in, especially with the winter holidays round the corner.

"The fiscal cliff negotiations appear to be making little progress with some warning that the House will have to remain open over Christmas," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.

Earlier in Asia, Tokyo's Nikkei 225 index jumped 1.7 percent to close at 9,742.73 — an eight-month high — as the yen remained weak against the dollar, a boost for Japan's export-reliant economy. The dollar was up a further 0.2 percent at 83.504 yen.

Hong Kong's Hang Seng shed earlier gains to close 0.3 percent lower at 22,445.50 while South Korea's Kospi rallied 1.4 percent to 2,002.77.

Oil prices tracked equities lower, with the benchmark New York rate down 12 cents at $86.65 a barrel.