Markets adjust to anaemic economy
Global stock markets fell again on Wednesday, continuing a four-week-long slide, as investors lowered their expectations for the global recovery.
Key unresolved issues are the US fiscal cliff, Greece's bid to stay in the euro, and China's leadership change.
The US markets were underwhelmed by hints by the Federal Reserve that it may resume monetary stimulus.
The S&P 500 - the US shares index most closely followed by the market - fell 1.4%, bringing its total slide to 7.3%.
The Japanese and European markets are down by about 4% since 18 October.
In the US, President Obama made clear at a press conference on Wednesday that he was not willing to countenance any further extension to Bush-era tax cuts for the top 2% income earners in the US.
He rejected Republican offers to make high earners pay more tax by closing loopholes rather than raising tax rates.
If the two sides fail to reach a compromise, automatic spending cuts and tax rises, dubbed the "fiscal cliff" will kick in on 1 January - something the International Monetary Fund has warned could knock four percentage points off the US growth rate.
The federal government would also run perilously close to the statutory limit on its borrowing ability, forcing it to choose between ignoring the limit or reneging on one of its spending obligations.
However, even if a compromise is reached, the US economic recovery is widely expected to remain tepid, despite recent encouraging signs from the housing market.
Minutes from the Federal Reserve's latest meeting released on Wednesday suggested the central bank was readying to buy up more long-term government debt if US unemployment fails to fall quickly enough and inflation remains subdued.
Despite the news of more monetary stimulus, the market continued to slide, reflecting a growing consensus among investors that the Fed's policies are becoming less effective.
Earlier in the day, the US Department of Commerce revealed that retail sales had fallen by 0.3% in October from a month earlier.
They were up 3.8% from a year ago, well below the 6% growth rate averaged over the last two years.
In Europe, the Bank of England cut its forecast for UK growth next year to 1% from 2%, saying the country's recovery would remain "slow and protracted".
The Bank said the UK economy, which has just emerged from a shallow recession, would not regain its pre-crisis level until 2015, making this the longest period of depression since the 1920s. On a positive note, unemployment continued its gradual fall in September.
On the continent, growth data for the third quarter of the year from the four main eurozone economies of Germany, France, Italy and Spain is to be released on Thursday.
Both the Italian and Spanish economies have been contracting for many months, while there are fears that France's economy is also flirting with recession.
Anti-austerity protests took place across the eurozone, with general strikes in Spain and Portugal.
Wrangling continues between eurozone leaders, the International Monetary Fund and private sector lenders about what to do about Greece, the most precariously placed of the eurozone members, whose economy it was revealed on Wednesday shrank a further 7.2% in the third quarter versus a year ago.
Eurozone leaders continue to withhold the latest tranche of bailout money until Athens can demonstrate that all three parties in the coalition government are on board with the agreed reforms.
Earlier this month, lenders gave Greece two more years to meet its austerity targets, recognising that a faster pace would be politically and economically disastrous for the country.
However, lenders face the dilemma that the longer Greece is allowed to overspend, the more debts it will incur.
Lenders already recognise that Greece's debts will not reach the original target of 120% of economic output by 2020 that was deemed sustainable, but there is no agreement as to whether and how to forgive more of Greece's debts, and which lenders should take the resulting losses.
Meanwhile, European Economic Affairs Commissioner Olli Rehn said that the Commission would not take any action against Spain or place any new demands for budget cuts, if the country's recession caused the government to overshoot its borrowing targets over the next two years.
However, Mr Rehn also warned that the measures announced by Madrid for 2014 so far had fallen short of the Commission's requirements.
In Asia, data on Tuesday showed that Japan's economy contracted in the three months to September, as exports and domestic consumer spending remain lethargic.
Meanwhile, China is braced for the formal announcement of the country's new Politburo Standing Committee.
The committee is expected to consist of nine people, headed by Xi Jinping as China's new president-in-waiting, and including the likely new premier Li Keqiang.
The new leadership faces the formidable challenge of switching its economy from one driven by investment, exports and construction, to one driven by domestic consumer spending, while maintaining a relatively high economic growth rate.
Consumer spending comprises a third of spending in China - compared with about 70% in the West - while investment comprises about half of the economy.
Official economic data, whose release last week came just ahead of the politically-charged leadership transition, painted a surprisingly healthy picture of the economy.
Industrial production, retail sales and fixed-asset investment all rose more than expected in October, suggesting that the period of much softer growth seen over the past year may have come to an end.
However, China remains exposed to further slowdowns in Europe, the US and Japan, its main three export markets.