European stocks closed slightly higher in a shortened day of trading on Monday. Despite some indexes closing lower over fears of a lack of a resolution to the U.S.'s "fiscal cliff," France's CAC 40 Index proved the main exception, closing higher by 0.58 percent.
U.S. fiscal woes remained firmly in focus. News of a setback in talks this weekend between lawmakers in Washington to reach a deal to avert a fiscal crisis — some $600 billion worth of spending hikes and tax cuts caused concern in Asian markets. Stocks traded lower there on Monday.
Hopes for a last-minute compromise between Democrats and Republicans failed this weekend but Senate leaders will meet again on New Year's Eve (16:00 London time) to continue negotiations to try to avert the Jan. 1 deadline that will trigger across-the-board tax increases and spending cuts.
Ishaq Siddiqi, market strategist at ETX Capital, said that traders were taking no chances in the final trading day of the year and were removing "cash off the table" in the likely event that the fiscal cliff will be triggered on Monday night.
"With nothing on the macroeconomic and corporate agenda in Europe, the fiscal cliff worries will dominate the mood," he said in a morning note.
"Furthermore, with the U.S. budget negotiations still unresolved combined with the political uncertainty in Italy ahead of elections in February, markets participants are now expecting a difficult (first quarter in 2013) and will greet the New Year with a worried mind."
In the U.K., prime minister David Cameron said that the country was on "the right track" in terms of its economic recovery. During his customary new year message, Cameron said that the U.K. could look forward to a future with "realism and optimism," after conceding that 2012 — a year in which Britain dropped back into recession — had been a "tough" year.
Despite Monday's losses, most of Asia's equity markets looked poised to end 2012 higher. Activity in China's vast manufacturing sector hit its fastest pace in December since May 2011, according to a survey of private factory managers.
The final reading for the HSBC Purchasing Managers' Index (PMI) rose to 51.5 in December, well above the preliminary reading of 50.9 published in the middle of the month and November's final reading of 50.5.
The HSBC PMI rose above 50, the line that demarcates accelerating from slowing growth, in November for the first time in more than a year.
In stocks news, Spanish utility firm Iberdrola announced on Monday that it is to sell its French wind parks for an initial payment of 350 million euros ($463 million); shares in the company closed 1.14 percent down.
Reports emerged last week that French firm Sanofi were in talks with cosmetics company Johnson & Johnson to buy a part of its McNeil unit. Sanofi shares closed higher by 0.55 percent on Monday and were the main driver for the CAC 40 Index, however trading volumes remained low.
Greek Stocks Lead Way in 2012
On the last day of trading for the year the Athens Composite Index emerged as the biggest gainer in 2012, with a 33 percent rise.