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updated: 12/4/2012 6:23 AM

Markets recover their poise as focus stays on U.S.

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Associated Press

LONDON -- Markets recovered their poise Tuesday despite concerns over the progress of budget talks in the U.S. and the state of the world's largest economy in the run-up to key jobs data at the end of the week.

Those concerns weighed on Wall Street on Monday and much of the Asian session earlier but European markets have proved a bit perkier. There was no real catalyst to the recovery, leading some commentators to credit the advance to an underlying sense of optimism in the markets as investors start to consider how to close out a year that's proven more profitable than many had thought.

"It is difficult to target what was responsible for this turnaround but the oft quoted `Santa rally' is taking a fair amount of credit," said Alastair McCaig, market analyst at IG

In Europe, the FTSE 100 index of leading British shares was up 0.1 percent at 5,876, while Germany's DAX rose 0.3 percent at 7,453. The CAC-40 in France was 0.7 percent higher at 3,590.

Wall Street was poised for a steady opening, with Dow futures and the broader S&P 500 futures were up 0.1 percent.

Trading was relatively subdued across markets, with the euro up 0.2 percent at $1.3074 and the price of a barrel of benchmark New York oil a cent higher at $89.10 a barrel.

The focus in the U.S. will likely remain on the budget discussions between the White House and Congress. An agreement has to be reached by the end of this year to avoid the so-called "fiscal cliff" of automatic tax increases and spending cuts.

The Republican majority in the House of Representatives followed the White House's plan with its own on Monday. Most analysts think a deal will be cobbled together in time though there may be some setbacks along the way.

"Equity markets remain unsettled for as long as the gap between tax increases and spending cuts cannot be bridged," said Neil MacKinnon, global macro strategist at VTB Capital. "We remain hopeful that at least some sort of partial compromise can be reached before the end of this year."

The focus will likely remain centered on the U.S. this week, though Thursday's European Central Bank policy meeting will also garner some interest. Though a cut in the benchmark interest rate is not anticipated, investors will be interested to see the latest quarterly economic forecasts from the bank.

The key moment of the trading week will likely be Friday's U.S. nonfarm payrolls figures for November, though the figures could well be distorted by the impact of Superstorm Sandy which battered much of the eastern seaboard. There's already evidence that it has had an impact alongside worries over the "fiscal cliff". Monday's monthly manufacturing survey from the Institute for Supply Management weakened far more than anticipated.

Earlier in Asia, Japan's Nikkei 225 index fell 0.3 percent to close at 9,432.46 while Hong Kong's Hang Seng gained 0.2 percent to 21,799.97. South Korea's Kospi fell 0.3 percent to 1,935.18. In mainland China, the Shanghai Composite Index rose 0.8 percent to 1,975.14. The smaller Shenzhen Composite Index added 1.3 percent to 743.62.

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