Stocks surge after US congress passes budget deal

NEW YORK—Stocks markets around the world breathed a huge sigh of relief yesterday after US lawmakers reached a budget agreement that will stop hundreds of billions of dollars in automatic tax increases and spending cuts that risked plunging the world’s biggest economy into recession.

Stocks around the world started 2013 with hefty gains as investors welcomed the vote in the House of Representatives that made sure the U.S. does not go over the so-called “fiscal cliff.” Though longer-term fiscal problems remain and President Barack Obama will likely face more battles with the Republican-dominated House, investors were relieved that the biggest near-term stumbling block to the world economy has been cleared.

“The degree to which the U.S. fiscal cliff was causing investors to repress risk appetite is all too clear on the first trading day of 2013,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. The Dow Jones industrial jumped 308 points, or 2.35 per cent, to close at 13,412 yesterday, the first trading day of the year. That’s the biggest gain the Dow has had since December 2011.

The Standard & Poor’s 500 index rose 36 points to 1,462. The Nasdaq composite rose almost 93 points to 3,112. The gains were broad. Ten stocks rose for every one that fell on the New York Stock Exchange. Technology and bank stocks had the biggest gains. Car-sharing company Zipcar surged 48 percent after agreeing to be bought by Avis for nearly $500 million.

Volume was at 4.1 billion shares. In Europe, the FTSE 100 index of leading British shares closed up 2.2 per cent to 6,027.37, its first foray above the 6,000 mark since July 2011. The CAC-40 in France rose 2.6 per cent to 3,733.93 while Germany’s DAX ended 2.2 per cent higher at 7,778.68.

Earlier, in Asia, Hong Kong’s Hang Seng index shot up 2.9 per cent to close at 23,311.89, its highest finish since June 1, 2011. Australia’s S&P/ASX 200 surged 1.2 per cent to close at 4,705.90, its best finish in 19 months while South Korea’s Kospi jumped 1.7 per cent to 2,031.10. Japanese and Chinese markets were closed for public holidays.

AP