Shares post big gains after deal to avoid the US 'fiscal cliff'
STOCK markets around the world surged yesterday as traders reacted with relief to the news that US politicians had agreed a deal on the so-called 'fiscal cliff'.
European markets hit their highest point in nearly two years, while US shares posted their biggest two-day gain in six months after lawmakers there finally resolved at least some of their budget problems.
The House of Representatives passed a bill late on Tuesday undoing income tax increases for more than 99pc of households.
The bipartisan vote broke a year-long impasse over how to prevent more than $600bn (€450bn) in tax increases and spending cuts that could lead the economy back into recession. President Barack Obama said he will sign the bill into law.
The Fiscal Cliff, as it became known, had dominated trading in recent weeks and the relief of a deal had a hugely positive effect on the markets.
In New York the benchmark Dow Jones Industrial Average surged 1.75pc while the Nasdaq index of hi-tech stocks jumped 2.3pc.
In London, the FTSE 100 Index topped 6,000 for the first time since July, as the index, as well as benchmarks in Paris and Frankfurt, rose by more than 2pc.
In Dublin the ISEQ Overall Index climbed 1.8pc.
"We sold off on the uncertainty of what it means to go over the fiscal cliff and that's been removed," said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management.
"We're re-valuing the market based on what's closer to the underlying economy and most of the economic reports have been pretty good."
On the currency market, the dollar weakened against the euro to $1.32 as traders moved away from perceived safe havens on the back of the budget deal. Brent Crude oil rose nearly 1pc to $112 a barrel.
"It's good to get the US budget deal resolved and to get the details, as it's been dragging on for a while," said Andrea Williams, head of European equities at Royal London Asset Management. "Politics were a real ball last year; this year started well."
The deal had a direct effect on the performance of several companies.
Construction giant CRH rose more than 3pc in Dublin, on the back of avoiding the cliff. The biggest company on the Irish market, CRH, garners close to half its revenue from North America.
Technology companies also had a good day, with Apple jumping 2.7pc. Facebook advanced 4pc.