There are concerns whether Mr Obama and a Republican-dominated Congress will be able to negotiate a way to avoid the so-called fiscal¹ cliff.

 

The cliff will see nearly $600bn of tax increases and spending cuts hit the US economy in January.

 

Japan's Nikkei 225 index ended the day flat, South Korea's Kospi rose 0.5% and Australia's ASX 200 gained 0.8%.

 

The fear is that the tax increases and spending cuts that could be enacted² if there is no agreement over deficit³ reduction may derail a fragile US economic recovery, and in a worst case scenario⁴ even push the economy into a recession.

 

"We head into the fiscal cliff, trying to find compromise where it wasn't possible before," said Rob Ryan, director of markets strategy, Asia-Pacific for Royal Bank of Scotland in Singapore.

 

 

The spending cuts and increased taxes are not the only concern among investors⁵.

 

The US economy has been battling various other issues, not least the high levels of unemployment in the country, which have dented⁶ consumer sentiment and impacted growth. 

 

Despite encouraging jobless numbers last week, unemployment continues to hover⁷ close to 8%.

 

There are concerns amongst some analysts⁸ that the jobs market may not improve anytime soon and that the recovery in the US will remain weak.

 

That does does not bode⁹ well for Asian economies as they rely heavily on US demand for exports and overall growth.

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