Markets surge as fiscal cliff is averted
The first sharemarkets to trade in the new year surged after the fiscal cliff deal was reached in Washington on New Year’s Day, a holiday in major global markets.
Crude oil and gold prices also gained as a fall in the US dollar heightened the comparative appeal of dollar-denominated resources.
The euro hit $US1.3300 for the first time since December 19.
On Wall Street, traders pushed the market to its biggest opening day of the year since 2009.
The Dow Jones Industrial Average rocketed 308.57 points, or 2.35%, to 13,412.71 for a second consecutive session of triple-digit gains.
The Dow had rallied 166 points, or 1.3%, on New Year's Eve, to close out a year of solid returns.
The S&P 500-stock index surged 2.5% to 1462.40 while the Nasdaq Composite was up 3.1% to 3112.26.
The broad-based rally, which saw all 30 Dow components and all 10 sectors of the S&P 500 advance, came after the House of Representatives passed legislation late on New Year’s Day that prevented most impending tax increases and postponed spending cuts by two months, while raising taxes on the wealthiest 2% of Americans.
However, longer-sighted investors will be looking further ahead to the next battles on the US legislative calendar, including debates on the federal budget, preprogrammed spending cuts and the debt ceiling, which limits the government’s ability to borrow.
All of these will occur in the next few months. For many investors, the relatively narrow scope of the congressional compromise virtually ensures continued political turmoil.
Commodities: Oil hits $US93, gold rises
Crude oil futures rose 1.9% as the fiscal cliff that threatened to send the US into recession was averted.
Light, sweet crude oil for February delivery settled $US1.30 higher at $US93.12 a barrel in New York, a three-month high. Brent crude oil on the ICE futures exchange rose $US1.63 to $US112.74 a barrel.
Gold rose and silver surged by more than 4% as the US budget deal drew buyers back to the precious metals after a weak end to 2012.
The most actively traded gold contract, for February delivery, settled up $US13, or 0.8%, at $US1688.80 an ounce in New York. Silver for March delivery surged 4.2% to $US31.49 an ounce.
Markets rise in Europe, Asia
European and Asian stocks rose with Hong Kong's Hang Seng Index rising to a 19-month high.
Apart from the easing of the US debt crisis, Asian shares were also boosted by surveys of purchasing managers in South Korea, Taiwan and India that suggested manufacturing was gaining steam after a subdued 2012.
PMI data from China earlier in the week had also pointed to renewed growth. Hong Kong's Hang Seng index rose 2.9% to 23,311.98, its best day of trading since September.
Australia's S&P ASX 200 ended up 1.2% at 4705.90, its biggest one-day gain in five months and Korea's Kospi gained 1.7% to 20,131.10, a nine-month high.
In Mumbai, the Bombay Stock Exchange's 30-stock Sensitive Index gained 0.7% to 19,714.24, the highest close in nearly two years.
Markets in China, Japan and New Zealand will open today.
European markets rallied sharply, with the Stoxx Europe 600 up 2% to 285.33, its highest close since February 2011.
The UK's FTSE 100 breached the 6000 mark, boosted by mining stocks, and hit its highest intraday level since July 8, 2011. It climbed 2.2% to a 1½-year high.
Germany's DAX added 2.2% to 7779 to a fresh five-year high and the French CAC surged 2.5% to 3734.
Currency trading: Dollar, yen down; euro up
The US dollar and Japanese yen fell sharply as the euro rallied.
The ICE dollar index fell to 79.50 after trading at 79.792 late on Monday in North America. Currency markets were largely closed on New Year’s Day.
The index, which tracks the dollar against six major rival currencies, moved as low as 79.283, as the fiscal deal passed through the US legislature.
The US is considered a safe-haven currency at times of uncertainty but falls when investors are willing to take more risk.
The euro changed hands at $1.3248, up from $1.3195 late on Monday.
The yen – also considered a safe haven currency – took an even sharper fall than the dollar, which bought ¥87.16 compared with ¥86.75. The euro was at ¥115.47 compared with ¥114.45.
The UK pound bought $US1.6301 from $US1.6242. The Australian dollar fetched $US1.0516 compared with $US1.0397.