Global shares steady as fiscal cliff deadline nears

LONDON (Reuters) - World stocks were set to end the year up almost 13 percent on Monday but uncertainty loomed as U.S. politicians prepared for last-minute talks to avoid a fiscal crunch of spending cuts and tax hikes that could drag down the world economy in 2013.

In Washington, the two political parties are set to hold further talks later to try and avoid the $600 billion "fiscal cliff" kicking in from the start of January and which if left unchecked, would wipe around 4 percent off U.S. GDP.

Senate Majority Leader Harry Reid said the Senate would reconvene at 11 a.m. Washington time (1600 GMT), to continue discussions, but warned on Sunday there were still significant differences between the two sides.

While hope has largely evaporated for any sort of broad deal on Monday, a lack of panic on markets reflected expectations that U.S. politicians will find a solution early in the New Year. U.S. stock futures, notably, were up.

"It is still expected that a deal be reached in early January. That will probably be greeted positively by markets but it looks like it will be a very short-term fix rather than one that addresses the longer-term issues," said Bank of Tokyo-Mitsubishi currency analyst Lee Hardman.

"The Treasury have said they could hold out until February until they have to raise the debt ceiling so going into next year we are set for more of the same kind of political uncertainty."

After a subdued day in Asia, where Japan's Nikkei as well as a number of other indexes had already shut for the year, limited year-end European trading left the MSCI all-world index steady at 336.97 at 6:20 a.m. ET.

The pan-European FTSEurofirst 300 has risen roughly 13 percent this year, largely due to the European Central Bank's actions to stem the region's debt crisis, and recovered from an early morning dip to stand up 0.2 percent by mid-morning.

Falls on London's FTSE were outweighed by gains in Paris while German, Italian and Swiss were among a clutch of other European markets closed.

Many economists have forecast further steady gains in equities next year as central banks continue to provide large scale support to major economies.

CLIFF VIEW

In currency markets, the U.S. dollar last stood at 86.06 yen, having retreated from Friday's high of 86.64 yen, which was the greenback's strongest level versus the Japanese currency since August 2010.

As the year draws to a close, the dollar is up about 12 percent against the yen, putting it on track for its biggest percentage gain versus the Japanese currency since 2005.

With a new Japanese government led by Prime Minister Shinzo Abe expected to pursue a policy mix of aggressive monetary easing and heavy fiscal spending to beat deflation, analysts see the yen staying under pressure in 2013.

The euro was down 0.16 percent on Monday to $1.3192 but is up 2 percent for the year. An agreement on the U.S. budget would be viewed as positive for riskier currencies such as the euro and Australian dollar, while a deadlock is deemed positive for the haven and highly liquid dollar.

"If we come in on Wednesday and don't have a resolution I don't think we will see a big risk-off move," said Michael Sneyd, FX strategist at BNP Paribas.

"The market seems to have almost taken into account the U.S. fiscal cliff discussions will go into the new year and investors seem to have taken off any risk-on positions before the holiday period."

OIL SLIPS

Commodities have been finding some recent support as economic data in key emerging economies China have started point to a gradual pick-up in the pace of growth in 2013.

Gold was $1,664.10 an ounce by 6:15 a.m. ET, up around 6 percent for the year and on track for a 12th consecutive year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks. Copper also rose, consolidating this year's 5 percent gain.

Oil prices bucked the trend, however, slipping for a third consecutive session, with failure to reach a solution in U.S. budget talks seen likely to cause a serious slowdown in the global economy and a large drop in fuel consumption.

Brent crude was down 40 cents to $110.22 a barrel by 6 a.m. ET. It is up 2.8 percent and averaged more than $111.65 this year, its fourth successive year of annual rises and above the previous 2011 record of $110.91.

"Significant market moves are likely when the deal gets done - or if no deal is done before the year-end ... In any case, neither outcome is fully priced in," Jason Schenker, president of U.S. consultancy Prestige Economics.

(Additional reporting by Francesco Canepa; Editing by Giles Elgood)

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To Save Wildlife, and Tourism, Kenyans Take Up Arms

ARCHER’S POST, Kenya — Julius Lokinyi was one of the most notorious poachers in this part of Kenya, accused of single-handedly killing as many as 100 elephants and selling the tusks by the side of the road in the dead of night, pumping vast amounts of ivory into a shadowy global underground trade.

But after being hounded, shamed, browbeaten and finally persuaded by his elders, he recently made a remarkable transformation. Elephants, he has come to believe, are actually worth more alive than dead, because of the tourists they attract. So Mr. Lokinyi stopped poaching and joined a grass-roots squad of rangers — essentially a conservation militia — to protect the wildlife he once slaughtered.

Nowadays he gets up at dawn, slurps down a cup of sugary tea, tightens his combat boots and marches off with other villagers, some who had never picked up a gun before and are little more than volunteers, to fight poachers.

“We got to protect the elephants,” said Mr. Lokinyi, whose hooded eyes now glow with the zeal of a convert.

From Tanzania to Cameroon, tens of thousands of elephants are being poached each year, more than at any time in decades, because of Asia’s soaring demand for ivory. Nothing seems to be stopping it, including deploying national armies, and the bullet-riddled carcasses keep stacking up. Scientists say that at this rate, African elephants could soon go the way of the wild American bison.

But in this stretch of northern Kenya, destitute villagers have seized upon an unconventional solution that, if replicated elsewhere, could be the key to saving thousands of elephants across Africa, conservationists say. In a growing number of communities here, people are so eager, even desperate, to protect their wildlife that civilians with no military experience are banding together, grabbing shotguns and G3 assault rifles and risking their lives to confront heavily armed poaching gangs.

It is essentially a militarized neighborhood watch, with loping, 6-foot-6 former herdsmen acting as the block captains, and the block being miles and miles of zebra-studded bush. These citizen-rangers are not doing this out of altruism or some undying love for pachyderms. They do it because in Kenya, perhaps more than just about anywhere else, wildlife means tourists, and tourists mean dollars — a lot of dollars.

It is not unusual here for a floppy-hatted visitor to drop $700 a night to sleep in a tent and absorb the sights, sounds and musky smells of wondrous game. Much of that money is contractually bound to go directly to impoverished local communities, which use it for everything from pumping water to college scholarships, giving them a clear financial stake in preserving wildlife. The safari business is a pillar of the Kenyan economy, generating more than a billion dollars a year and nearly 500,000 jobs: cooks, cleaners, bead-stringers, safari guides, bush pilots, even accountants to tally the proceeds.

Surprisingly, many jobs in the safari industry can pay as much as poaching. Though the ivory trade may seem lucrative, it is often like the Somali pirate business model, with the entry-level hijacker getting just a minuscule cut of the million-dollar ransoms. While a pound of ivory can fetch $1,000 on the streets of Beijing, Mr. Lokinyi, despite his lengthy poaching résumé, was broke, making it easier to lure him out of the business.

Villagers are also turning against poachers because the illegal wildlife trade fuels crime, corruption, instability and intercommunal fighting. Here in northern Kenya, poachers are diversifying into stealing livestock, printing counterfeit money and sometimes holding up tourists. Some are even buying assault rifles used in ethnic conflicts.

The conservation militias are often the only security forces around, so they have become de facto 911 squads, rushing off to all sorts of emergencies in areas too remote for the police to quickly gain access to and often getting into shootouts with poachers and bandits.

“This isn’t just about animals,” said Paul Elkan, a director at the Wildlife Conservation Society, who is trying to set up community ranger squads in South Sudan modeled on the Kenyan template. “It’s about security, conflict reconciliation, even nation building.”

The rangers tend to be hardened and uneducated, drawn from different ethnic groups and the surplus of unemployed youth. Gabriel Lesoipa was a goat herder; Joseph Lopeiyok, a cattle rustler; John Pameri won his coveted spot because he was fast — at the time he was selected, the first entry requirement was a grueling 11-mile race.

Many are considered warriors in their communities, experts in so-called bushcraft from years of grazing cattle and goats across the thorny savanna — and defending them against armed raiders. They can follow faint footprints across long, thirsty distances and instantly intuit when someone has trespassed on their land.

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Matthew & Camila McConaughey Name Their Son Livingston

12/29/2012 at 09:15 PM EST

Camila and Matthew McConaughey

Gary Miller/FilmMagic

Matthew McConaughey has spilled the beans about his new baby!

"Camila gave birth to our third child yesterday morning. Our son, Livingston Alves McConaughey, was born at 7:43 a.m. on 12.28.12," he wrote on his Whosay page Saturday night.

"He greeted the world at 9 lbs., and 21 inches. Bless up and thank you for your well wishes."

Camila, 29, and her actor husband, 43, welcomed their third child in Austin, Texas, Friday, PEOPLE previously confirmed.

The couple – also parents to Vida, almost 3, and Levi, 4 – announced the pregnancy in July, just one month after they wed in Texas.

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Kenya hospital imprisons new mothers with no money

NAIROBI, Kenya (AP) — The director of the Pumwani Maternity Hospital, located in a hardscrabble neighborhood of downtown Nairobi, freely acknowledges what he's accused of: detaining mothers who can't pay their bills. Lazarus Omondi says it's the only way he can keep his medical center running.

Two mothers who live in a mud-wall and tin-roof slum a short walk from the maternity hospital, which is affiliated with the Nairobi City Council, told The Associated Press that Pumwani wouldn't let them leave after delivering their babies. The bills the mothers couldn't afford were $60 and $160. Guards would beat mothers with sticks who tried to leave without paying, one of the women said.

Now, a New York-based group has filed a lawsuit on the women's behalf in hopes of forcing Pumwani to stop the practice, a practice Omondi is candid about.

"We hold you and squeeze you until we get what we can get. We must be self-sufficient," Omondi said in an interview in his hospital office. "The hospital must get money to pay electricity, to pay water. We must pay our doctors and our workers."

"They stay there until they pay. They must pay," he said of the 350 mothers who give birth each week on average. "If you don't pay the hospital will collapse."

The Center for Reproductive Rights, which filed the suit this month in the High Court of Kenya, says detaining women for not paying is illegal. Pumwani is associated with the Nairobi City Council, one reason it might be able to get away with such practices, and the patients are among Nairobi's poorest with hardly anyone to stand up for them.

Maimouna Awuor was an impoverished mother of four when she was to give birth to her fifth in October 2010. Like many who live in Nairobi's slums, Awuor performs odd jobs in the hopes of earning enough money to feed her kids that day. Awuor, who is named in the lawsuit, says she had saved $12 and hoped to go to a lower-cost clinic but was turned away and sent to Pumwani. After giving birth, she couldn't pay the $60 bill, and was held with what she believes was about 60 other women and their infants.

"We were sleeping three to a bed, sometimes four," she said. "They abuse you, they call you names," she said of the hospital staff.

She said saw some women tried to flee but they were beaten by the guards and turned back. While her husband worked at a faraway refugee camp, Awuor's 9-year-old daughter took care of her siblings. A friend helped feed them, she said, while the children stayed in the family's 50-square-foot shack, where rent is $18 a month. She says she was released after 20 days after Nairobi's mayor paid her bill. Politicians in Kenya in general are expected to give out money and get a budget to do so.

A second mother named in the lawsuit, Margaret Anyoso, says she was locked up in Pumwani for six days in 2010 because she could not pay her $160 bill. Her pregnancy was complicated by a punctured bladder and heavy bleeding.

"I did not see my child until the sixth day after the surgery. The hospital staff were keeping her away from me and it was only when I caused a scene that they brought her to me," said Anyoso, a vegetable seller and a single mother with five children who makes $5 on a good day.

Anyoso said she didn't have clothes for her child so she wrapped her in a blood-stained blouse. She was released after relatives paid the bill.

One woman says she was detained for nine months and was released only after going on a hunger strike. The Center for Reproductive Rights says other hospitals also detain non-paying patients.

Judy Okal, the acting Africa director for the Center for Reproductive Rights, said her group filed the lawsuit so all Kenyan women, regardless of socio-economic status, are able to receive health care without fear of imprisonment. The hospital, the attorney general, the City Council of Nairobi and two government ministries are named in the suit.

___

Associated Press reporter Tom Odula contributed to this report.

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Wall Street Week Ahead: Cliff may be a fear, but debt ceiling much scarier

(Reuters) - Investors fearing a stock market plunge - if the United States tumbles off the "fiscal cliff" next week - may want to relax.

But they should be scared if a few weeks later, Washington fails to reach a deal to increase the nation's debt ceiling because that raises the threat of a default, another credit downgrade and a panic in the financial markets.

Market strategists say that while falling off the cliff for any lengthy period - which would lead to automatic tax hikes and stiff cuts in government spending - would badly hurt both consumer and business confidence, it would take some time for the U.S. economy to slide into recession. In the meantime, there would be plenty of chances for lawmakers to make amends by reversing some of the effects.

That has been reflected in a U.S. stock market that has still not shown signs of melting down. Instead, it has drifted lower and become more volatile.

In some ways, that has let Washington off the hook. In the past, a plunge in stock prices forced the hand of Congress, such as in the middle of the financial crisis in 2008.

"If this thing continues for a bit longer and the result is you get a U.S. debt downgrade ... the risk is not that you lose two-and-a-half percent, the risk is that you lose ten and a half," said Jonathan Golub, chief U.S. equity strategist at UBS Equity Research, in New York.

U.S. Treasury Secretary Tim Geithner said this week that the United States will technically reach its debt limit at the end of the year.

INVESTORS WARY OF JANUARY

The White House has said it will not negotiate the debt ceiling as in 2011, when the fight over what was once a procedural matter preceded the first-ever downgrade of the U.S. credit rating. But it may be forced into such a battle again. A repeat of that war is most worrisome for markets.

Markets posted several days of sharp losses in the period surrounding the debt ceiling fight in 2011. Even after a bill to increase the ceiling passed, stocks plunged in what was seen as a vote of "no confidence" in Washington's ability to function, considering how close lawmakers came to a default.

Credit ratings agency Standard & Poor's lowered the U.S. sovereign rating to double-A-plus, citing Washington's legislative problems as one reason for the downgrade from triple-A status. The benchmark S&P 500 dropped 16 percent in a four-week period ending August 21, 2011.

"I think there will be a tremendous fight between Democrats and Republicans about the debt ceiling," said Jon Najarian, a co-founder of online brokerage TradeMonster.com, in Chicago.

"I think that is the biggest risk to the downside in January for the market and the U.S. economy."

There are some signs in the options market that investors are starting to eye the January period with more wariness. The CBOE Volatility Index, or the VIX, the market's preferred indicator of anxiety, has remained at relatively low levels throughout this process, though on Thursday it edged above 20 for the first time since July.

More notable is the action in VIX futures markets, which shows a sharper increase in expected volatility in January than in later-dated contracts. January VIX futures are up nearly 23 percent in the last seven trading days, compared with a 13 percent increase in March futures and an 8 percent increase in May futures. That's a sign of increasing near-term worry among market participants.

The CBOE Volatility Index closed on Friday at 22.72, gaining nearly 17 percent to end at its highest level since June as details emerged of a meeting on Friday afternoon of President Barack Obama with Senate and House leaders from both parties where the president offered proposals similar to those already rejected by Republicans. Stocks slid in late trading and equity futures continued that slide after cash markets closed.

"I was stunned Obama didn't have another plan, and that's absolutely why we sold off," said Mike Shea, a managing partner and trader at Direct Access Partners LLC, in New York.

Obama offered hope for a last-minute agreement to avoid the fiscal cliff after a meeting with congressional leaders, although he scolded Congress for leaving the problem unresolved until the 11th hour.

"The hour for immediate action is here," he told reporters at a White House briefing. "I'm modestly optimistic that an agreement can be achieved."

The U.S. House of Representatives is set to convene on Sunday and continue working through the New Year's Day holiday. Obama has proposed maintaining current tax rates for all but the highest earners.

Consumers don't appear at all traumatized by the fiscal cliff talks, as yet. Helping to bolster consumer confidence has been a continued recovery in the housing market and growth in the labor market, albeit slow.

The latest take on employment will be out next Friday, when the U.S. Labor Department's non-farm payrolls report is expected to show jobs growth of 145,000 for December, in line with recent growth.

Consumers will see their paychecks affected if lawmakers cannot broker a deal and tax rates rise, but the effect on spending is likely to be gradual.

PLAYING DEFENSE

Options strategists have noted an increase in positions to guard against weakness in defense stocks such as General Dynamics because those stocks would be affected by spending cuts set for that sector. Notably, though, the PHLX Defense Index is less than 1 percent away from an all-time high reached on December 20.

This underscores the view taken by most investors and strategists: One way or another, Washington will come to an agreement to offset some effects of the cliff. The result will not be entirely satisfying, but it will be enough to satisfy investors.

"Expectations are pretty low at this point, and yet the equity market hasn't reacted," said Carmine Grigoli, chief U.S. investment strategist at Mizuho Securities USA, in New York. "You're not going to see the markets react to anything with more than a 5 (percent) to 7 percent correction."

Save for a brief 3.6 percent drop in equity futures late on Thursday evening last week after House Speaker John Boehner had to cancel a scheduled vote on a tax-hike bill due to lack of Republican support, markets have not shown the same kind of volatility as in 2008 or 2011.

A gradual decline remains possible, Golub said, if business and consumer confidence continues to take a hit on the back of fiscal cliff worries. The Conference Board's measure of consumer confidence fell sharply in December, a drop blamed in part on the fiscal issues.

"If Congress came out and said that everything is off the table, yeah, that would be a short-term shock to the market, but that's not likely," said Richard Weiss, a Mountain View, California-based senior money manager at American Century Investments.

"Things will be resolved, just maybe not on a good time table. All else being equal, we see any further decline as a buying opportunity."

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: david.gaffen(at)thomsonreuters.com)

(Reporting by Edward Krudy and Ryan Vlastelica in New York and Doris Frankel in Chicago; Writing by David Gaffen; Editing by Martin Howell, Steve Orlofsky and Jan Paschal)

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IHT Rendezvous: European Union Plans to Accentuate the Positive in 2013

LONDON — With the prospect of more troubles ahead for the European Union in 2013, officials have launched a campaign to remind its 500 million citizens of the benefits of belonging to the 27-nation alliance.

Next year has been designated the European Year of Citizens by the decision-makers in Brussels, who have highlighted a range of advantages, from freer cross-border travel to cheaper cross-border phone calls, to convince a sometimes skeptical public that membership has been worthwhile.

It might seem like a hard sell after a year in which the Union limped from crisis to crisis over a debt mountain that threatened the survival of the euro, the currency shared by 17 E.U. states.

Action by European leaders eventually succeeded in keeping Greece within the eurozone amid fears that a Greek exit — a “Grexit” — could spark the collapse of the single currency.

But that is only partial consolation for a European population facing another year of the kind of tough austerity programs that sparked strikes and protests in the most indebted states in 2012.

The Brussels bureaucrats offer a longer-term view, pointing out that tangible progress has been made in the 20 years since the creation of European Union citizenship that has improved the lives of millions.

“Nowadays traveling abroad entails cheaper travel costs, hassle-free border crossings, package holiday guarantees, access to healthcare systems and cheaper calls when you phone home,” according to the European Commission. “These are just some of the benefits derived from E.U. citizenship.”

Large numbers of Europeans have certainly taken advantage of free movement between member states to improve their job prospects outside their home nations. More than 12 million Europeans lived in a member state other than their own, according to data from 2010, before austerity began to bite.

Anecdotal evidence is that growing numbers of Europeans are now on the move, including French millionaires escaping tax hikes at home and young jobless Spaniards heading to find work in Germany.

Europe may have escaped a “Grexit” in 2012 but a new crisis is looming with the prospect of a “Brexit”, as Britain’s Conservative-led government prepares to spell out its position on its future relations with its European partners.

Prime Minister David Cameron, under pressure from the Euroskeptic wing of his party, is expected next month to reaffirm that he will seek to claw back powers that have been passed to Europe and that he is prepared to hold a national referendum on continued E.U. membership after the next British election.

Herman Van Rompuy, president of the European Council, which brings together the alliance’s political leaders, has warned that the British move threatens the future of the Union.

“If every member state were able to cherry-pick those parts of existing policies that they most like, and opt out of those that they least like, the union in general, and the single market in particular, would soon unravel,” he told The Guardian.

Is Europe over the worst? Or will continuing economic weakness and a potential “Brexit” threaten its prospects in 2013? Tell us what you think. And, if you’re a European, let us know if E.U. membership has proved to be a benefit or a hindrance.

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Matthew McConaughey & Wife Camila Welcome Baby No. 3

By Elizabeth Leonard

12/28/2012 at 06:10 PM EST

Camila and Matthew McConaughey

Gary Miller/FilmMagic

It's a very merry holiday week for Matthew McConaughey and his wife Camila.

The couple welcomed their third child together in Austin, Texas, on Friday, sources confirm to PEOPLE.

The pair, who are also parents to Vida, who turns 3 next month, and Levi, 4, announced the pregnancy just one month after their June nuptials in Texas.

Camila, 29, joked that even as she put on pregnancy pounds, her actor husband, 43, was losing weight – dramatically – for The Dallas Buyers Club, in which he plays the real-life Ron Woodruff, who contracted HIV.

"We have gone the complete opposite direction eating wise, but we're navigating it," she said last summer. "But I don't really have cravings yet."

McConaughey's latest movie, Mud, will be released April. 26,

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Kenya hospital imprisons new mothers with no money

NAIROBI, Kenya (AP) — The director of the Pumwani Maternity Hospital, located in a hardscrabble neighborhood of downtown Nairobi, freely acknowledges what he's accused of: detaining mothers who can't pay their bills. Lazarus Omondi says it's the only way he can keep his medical center running.

Two mothers who live in a mud-wall and tin-roof slum a short walk from the maternity hospital, which is affiliated with the Nairobi City Council, told The Associated Press that Pumwani wouldn't let them leave after delivering their babies. The bills the mothers couldn't afford were $60 and $160. Guards would beat mothers with sticks who tried to leave without paying, one of the women said.

Now, a New York-based group has filed a lawsuit on the women's behalf in hopes of forcing Pumwani to stop the practice, a practice Omondi is candid about.

"We hold you and squeeze you until we get what we can get. We must be self-sufficient," Omondi said in an interview in his hospital office. "The hospital must get money to pay electricity, to pay water. We must pay our doctors and our workers."

"They stay there until they pay. They must pay," he said of the 350 mothers who give birth each week on average. "If you don't pay the hospital will collapse."

The Center for Reproductive Rights, which filed the suit this month in the High Court of Kenya, says detaining women for not paying is illegal. Pumwani is associated with the Nairobi City Council, one reason it might be able to get away with such practices, and the patients are among Nairobi's poorest with hardly anyone to stand up for them.

Maimouna Awuor was an impoverished mother of four when she was to give birth to her fifth in October 2010. Like many who live in Nairobi's slums, Awuor performs odd jobs in the hopes of earning enough money to feed her kids that day. Awuor, who is named in the lawsuit, says she had saved $12 and hoped to go to a lower-cost clinic but was turned away and sent to Pumwani. After giving birth, she couldn't pay the $60 bill, and was held with what she believes was about 60 other women and their infants.

"We were sleeping three to a bed, sometimes four," she said. "They abuse you, they call you names," she said of the hospital staff.

She said saw some women tried to flee but they were beaten by the guards and turned back. While her husband worked at a faraway refugee camp, Awuor's 9-year-old daughter took care of her siblings. A friend helped feed them, she said, while the children stayed in the family's 50-square-foot shack, where rent is $18 a month. She says she was released after 20 days after Nairobi's mayor paid her bill. Politicians in Kenya in general are expected to give out money and get a budget to do so.

A second mother named in the lawsuit, Margaret Anyoso, says she was locked up in Pumwani for six days in 2010 because she could not pay her $160 bill. Her pregnancy was complicated by a punctured bladder and heavy bleeding.

"I did not see my child until the sixth day after the surgery. The hospital staff were keeping her away from me and it was only when I caused a scene that they brought her to me," said Anyoso, a vegetable seller and a single mother with five children who makes $5 on a good day.

Anyoso said she didn't have clothes for her child so she wrapped her in a blood-stained blouse. She was released after relatives paid the bill.

One woman says she was detained for nine months and was released only after going on a hunger strike. The Center for Reproductive Rights says other hospitals also detain non-paying patients.

Judy Okal, the acting Africa director for the Center for Reproductive Rights, said her group filed the lawsuit so all Kenyan women, regardless of socio-economic status, are able to receive health care without fear of imprisonment. The hospital, the attorney general, the City Council of Nairobi and two government ministries are named in the suit.

___

Associated Press reporter Tom Odula contributed to this report.

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Wall Street ends sour week with fifth straight decline

NEW YORK (Reuters) - Stocks fell for a fifth straight day on Friday, dropping 1 percent and marking the S&P 500's longest losing streak in three months as the federal government edged closer to the "fiscal cliff" with no solution in sight.

President Barack Obama and top congressional leaders met at the White House to work on a solution for the draconian debt-reduction measures set to take effect beginning next week. Stocks, which have been influenced by little else than the flood of fiscal cliff headlines from Washington in recent days, extended losses going into the close with the Dow Jones industrial average and the S&P 500 each losing 1 percent, after reports that Obama would not offer a new plan to Republicans. The Dow closed below 13,000 for the first time since December 4.

"I was stunned Obama didn't have another plan, and that's absolutely why we sold off," said Mike Shea, managing partner at Direct Access Partners LLC in New York. "He's going to force the House to come to him with something different. I think that's a surprise. The entire market is disappointed in a lack of leadership in Washington."

In a sign of investor anxiety, the CBOE Volatility Index <.vix>, known as the VIX, jumped 16.69 percent to 22.72, closing at its highest level since June. Wall Street's favorite fear barometer has risen for five straight weeks, surging more than 40 percent over that time.

The Dow Jones industrial average <.dji> dropped 158.20 points, or 1.21 percent, to 12,938.11 at the close. The Standard & Poor's 500 Index <.spx> lost 15.67 points, or 1.11 percent, to 1,402.43. The Nasdaq Composite Index <.ixic> fell 25.59 points, or 0.86 percent, to end at 2,960.31.

For the week, the Dow fell 1.9 percent. The S&P 500 also lost 1.9 percent for the week, marking its worst weekly performance since mid-November. The Nasdaq finished the week down 2 percent. In contrast, the VIX jumped 22 percent for the week.

Pessimism continued after the market closed, with stock futures indicating even steeper losses. S&P 500 futures dropped 26.7 points, or 1.9 percent, eclipsing the decline seen in the regular session.

All 10 S&P 500 sectors fell during Friday's regular trading, with most posting declines of 1 percent, but energy and material shares were among the weakest of the day, with both groups closely tied to the pace of growth.

An S&P energy sector index <.gspe> slid 1.8 percent, with Exxon Mobil down 2 percent at $85.10, and Chevron Corp off 1.9 percent at $106.45. The S&P material sector index <.gspm> fell 1.3 percent, with U.S. Steel Corp down 2.6 percent at $23.03.

Decliners outnumbered advancers by a ratio of slightly more than 2 to 1 on the New York Stock Exchange, while on the Nasdaq, two stocks fell for every one that rose.

"We've been whipsawing around on low volume and rumors that come out on the cliff," said Eric Green, senior portfolio manager at Penn Capital Management in Philadelphia, who helps oversee $7 billion in assets.

With time running short, lawmakers may opt to allow the higher taxes and across-the-board federal spending cuts to go into effect and attempt to pass a retroactive fix soon after the new year. Standard & Poor's said an impasse on the cliff wouldn't affect the sovereign credit rating of the United States.

"We're not as concerned with January 1 as the market seems to be," said Richard Weiss, senior money manager at American Century Investments, in Mountain View, California. "Things will be resolved, just maybe not on a good timetable, and any deal can easily be retroactive."

Trading volume was light throughout the holiday-shortened week, with just 4.46 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT on Friday, below the daily average so far this year of about 6.48 billion shares. On Monday, the U.S. stock market closed early for Christmas Eve, and the market was shut on Tuesday for Christmas. Many senior traders were absent this week for the holidays.

Highlighting Wall Street's sensitivity to developments in Washington, stocks tumbled more than 1 percent on Thursday after Senate Majority Leader Harry Reid warned that a deal was unlikely before the deadline. But late in the day, stocks nearly bounced back when the House said it would hold an unusual Sunday session to work on a fiscal solution.

Positive economic data failed to alter the market's mood.

The National Association of Realtors said contracts to buy previously owned U.S. homes rose in November to their highest level in 2-1/2 years, while a report from the Institute for Supply Management-Chicago showed business activity in the U.S. Midwest expanded in December.

"Economic reports have been very favorable, and once Congress comes to a resolution, the market should resume an upward trend, based on the data," said Weiss, who helps oversee about $125 billion in assets. "All else being equal, we see any further decline as a buying opportunity."

Barnes & Noble Inc rose 4.3 percent to $14.97 after the top U.S. bookstore chain said British publisher Pearson Plc had agreed to make a strategic investment in its Nook Media subsidiary. But Barnes & Noble also said its Nook business will not meet its previous projection for fiscal year 2013.

Shares of magicJack VocalTec Ltd jumped 10.3 percent to $17.95 after the company gave a strong fourth-quarter outlook and named Gerald Vento president and chief executive, effective January 1.

The U.S.-listed shares of Canadian drugmaker Aeterna Zentaris Inc surged 13.8 percent to $2.47 after the company said it had reached an agreement with the U.S. Food and Drug Administration on a special protocol assessment by the FDA for a Phase 3 registration trial in endometrial cancer with AEZS-108 treatment.

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)

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China Toughens Its Restrictions on Use of the Internet

HONG KONG — The Chinese government issued new rules on Friday requiring Internet users to provide their real names to service providers, while assigning Internet companies greater responsibility for deleting forbidden postings and reporting them to the authorities.

The decision came as government censors have sharply stepped up restrictions on China’s international Internet traffic in recent weeks. The restrictions are making it harder for businesses to protect commercial secrets and for individuals to view overseas Web sites that the Chinese Communist Party deems politically sensitive.

The new regulations, issued by the Standing Committee of the National People’s Congress, allow Internet users to continue to adopt pseudonyms for their online postings, but only if they first provide their real names to service providers, a measure that could chill some of the vibrant discourse on the country’s Twitter-like microblogs. The authorities periodically detain and even jail Internet users for politically sensitive comments, such as calls for a multiparty democracy or allegations of impropriety by local officials.

Any entity providing Internet access, including over fixed-line or mobile phones, “should when signing agreements with users or confirming provision of services, demand that users provide true information about their identities,” the Standing Committee ordered.

In recent weeks, Internet users in China have exposed a series of sexual and financial scandals that have led to the resignations or dismissals of at least 10 local officials. International news media have also published a series of reports in recent months on the accumulation of wealth by the family members of China’s leaders, and some Web sites carrying such reports, including Bloomberg’s and the English- and Chinese-language sites of The New York Times, have been assiduously blocked, while Internet comments about them have been swiftly deleted.

The regulations issued Friday build on a series of similar administrative guidelines and municipal rules issued over the past year. China’s mostly private Internet service providers have been slow to comply with them, fearing the reactions of their customers. The Standing Committee’s decision has much greater legal force, and puts far more pressure on Chinese Internet providers to comply more quickly and more comprehensively, Internet specialists said.

In what appeared to be an attempt to make the decision more palatable to the Chinese public, the Standing Committee also included a mandate for businesses in China to be more cautious in gathering and protecting electronic data.

“Nowadays on the Internet there are very serious problems with citizens’ personal electronic information being recklessly collected, used without approval, illegally disclosed, and even traded and sold,” Li Fei, a deputy director of the Standing Committee’s legislative affairs panel, said at a news conference in Beijing on Friday. “There are also a large number of cases of invasive attacks on information systems to steal personal electronic information, as well as lawbreaking on the Internet through swindles and through defaming and slandering others.”

Mr. Li denied that the government was seeking to prevent the exposure of corruption.

“When citizens exercise these rights according to the law, no organization or individual can use any reason or excuse to interfere, and cannot suppress them or exact revenge,” he said. “At the same time, when citizens exercise their rights, including through use of the Internet, they should stay within the bounds of the Constitution and the laws, and must not harm the legitimate rights and interests of the state, society, the collective or of other citizens.”

A spokesman for the National People’s Congress said that that 145 members of the Standing Committee voted in favor of the new rules, with 5 abstaining and 1 voting against them.

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