Global markets face the prospect of entering the new year without a US budget deal, as Democratic and Republican senators remained locked in talks yesterday ahead of the year-end deadline for agreement.

In an interview broadcast yesterday, Barack Obama said he was optimistic that Congress would avert the automatic tax rises and spending cuts that are due to start in January without a deal. But the president also attacked Republicans for their “overriding” priority of protecting the incomes of the wealthy in the negotiations and vowed to press his plan for higher rates if Congress failed to reach agreement in coming days.

In the absence of a deal, automatic tax rises and spending cuts worth $600bn will begin in January – a set of measures that threaten to tip the world’s largest economy into recession.