LONDON — Markets appeared today to be taking in stride the ongoing failure of U.S. politicians to agree to a budget deal in time to avoid automatic tax increases and spending cuts that many economists think could tilt the world’s largest economy back into recession.

With just hours to go before the U.S. falls off the so-called “fiscal cliff,” Republicans and Democrats remained divided over taxes and spending, raising the prospect that markets will start 2013 without a clear idea of America’s budget policy.

Discussions in the Senate broke off Sunday night without agreement. Senators are due to reconvene at 11 a.m. to try to hammer out a deal before the deadline.

“With precisely zero headway made on the fiscal front resulting from the early weekend return by Congressional lawmakers, hopes are fast-fading of any sort of compromise before the end of 2012,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.

However, it’s not the first time that budget discussions in the U.S. have gone down to the wire only for a deal to be eventually reached.

Many investors remain confident that some sort of deal will be struck in time following positive noises coming out from late Sunday discussions between Senate Minority Leader Mitch McConnell, a Republican, and Vice President Joe Biden, a Democrat.