Shares in London surge after US 'fiscal cliff' deal
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Your support makes all the difference.The first stock market session of 2013 began with the FTSE 100 swinging through the 6,000 point barrier as shares bounced on relief that American lawmakers had shielded the world's largest economy from a fiscal blow worth hundreds of billions of dollars.
The automatic measures could have shoved the country back into recession. But Congress finally approved a last-minute agreement on Tuesday night to prevent the bulk of the tax hikes and temporarily delay spending cuts set to come into force this month, sending shares higher when traders in London and New York returned to their desks yesterday.
Although a number of critical budget issues remain outstanding and could yet weigh to the American, and global, economic recovery, for now, investors were content to celebrate the narrow agreement between Republicans and Democrats.
The FTSE 100 ended the day 2.2 per cent higher at 6,027.37, its highest level since July 2011. The jump equates to a nearly £33bn gain in the value of the hundred biggest companies listed in London.
But it was not just the UK. Markets around the world saw healthy gains, with shares in Hong Kong, South Korea and Australia ending higher. Japan and the Shanghai Composite Index in China remained closed yesterday.
In New York, the Dow Jones Industrial Average was about 1.8 per cent higher in early afternoon trading.
"We had three choices: We were going to be off the cliff, we we're going to be on the cliff, or we were going to avoid the cliff, and we avoided it," Brian Battle, the director of trading at Performance Trust Capital Partners in Chicago, said.
But he warned about the looming challenges as the debate now shifts to raising the debt ceiling in two months. "I think it's going to be short-lived because the relief rally today was created by politics, and the next cliff is going to be created by politics."
Giving further strength to markets were a series of mostly positive reports on global manufacturing trends.
The Chartered Institue of Purchasing and Supply's survey - where a score of over 50 signals growth in manufacturing - hit 51.4 in December, boosting the UK's growth prospects.
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