Asian stocks tumbled Thursday as hopes began to fade for a quick agreement among U.S. leaders to avoid a "fiscal cliff" that could derail the world's biggest economy.
Unless President Barack Obama and Congress reach a compromise, a series of expiring tax cuts and across-the-board spending reductions will take effect in 2013 — at a cost of about $800 billion. Economists say that could knock the U.S. economy back into recession.
Hong Kong's Hang Seng fell 1.1 percent to 21,216.40. South Korea's Kospi shed 1.6 percent to 1,863.16. Australia's S&P/ASX 200 fell 1.1 percent to 4,341.60. Benchmarks in Singapore, Taiwan and mainland China also fell.
Analysts at Credit Agricole CIB said in a market commentary that a "cautious tone" is likely to permeate trading, given the uncertainty over the situation in the U.S. Obama is expected to meet the top leaders of both political parties at the White House on Friday for discussions.
Meanwhile, a weakening yen helped keep Japanese stocks buoyant. The Nikkei 225 index rose 0.8 percent to 8,733.86.
Investors remain unnerved after demonstrations Wednesday in Europe by workers who are protesting the austerity measures that governments have been imposing to reduce public debt.
On top of that, official figures showed industrial output among the 17 countries that use the euro dropped 2.5 percent on the month in September, worse than analysts had expected. Figures on Thursday are expected to confirm that the eurozone is in recession.
Stocks on Wall Street fell sharply Wednesday as hope diminished for a compromise on the tax and spending cuts due to take effect in 2013. The Dow closed down 1.5 percent, at 12,570.95. The Standard & Poor's 500 index fell 1.4 percent to 1,355.49. The Nasdaq composite index lost 1.3 percent to 2,846.81.
Benchmark oil for December delivery was down 3 cents to $86.29 in electronic trading on the New York Mercantile Exchange. The contract rose 94 cents to close at $86.32 a barrel on the Nymex on Wednesday.
In currencies, the euro fell to $1.2734 from $1.2745 late Wednesday in New York. The dollar rose slightly to 80.21 yen from 80.17 yen.