LONDON -- World stock markets surged on Wednesday, making a bright start to 2013, after the United States clinched a deal to avert the so-called "fiscal cliff" of drastic tax rises and automatic spending cuts.
European and Asian markets spiked higher following news that Congress had finally backed an agreement to avert "fiscal cliff" measures which had threatened to send the world's biggest economy spinning back into recession with global repercussions.
The agreement is seen as a step towards correcting U.S. public finances which are showing a huge annual deficit and accumulated mountain of debt.
In morning deals, London's benchmark FTSE 100 index of top companies jumped 1.8% to 6,003.96 points, Frankfurt's DAX 30 index surged 1.95% to 7,762.09 points and the Paris CAC 40 leapt 1.89% to 3,710.
In Asia, the Hong Kong market was the biggest riser, soaring by 2.89% in value, with sentiment also lifted by positive Chinese manufacturing data.
Sydney gained 1.23%, and Seoul added 1.71%. Financial markets in Japan and mainland China were closed for a public holiday.
"It may have come at the last minute, but U.S. lawmakers finally managed to find some common ground by voting through a package of policies designed to avoid the immediate fiscal cliff," said ETX Capital trader Joe Rundle.
"Financial markets have responded accordingly with Asian shares performing strongly and European markets posting sharp gains in the first trading day of 2013 and U.S. markets are likely to react in the same fashion."
The euro meanwhile hit a two-week high level of $1.3300 in Asian deals as investor appetite for risk increased. It later stood at $1.3256 in London.
The price of gold advanced to $1,681.71 an ounce on the London Bullion Market from $1,664. World oil prices also rose, with New York crude climbing back above $92 per barrel.
Late on Tuesday, the House of Representatives passed a deal between the White House and Republicans to raise taxes on the rich and delay for two months automatic budget cuts of $109 billion, lifting the clouds of immediate crisis.
The outcome of negotiations had hung in the balance for hours as House conservatives sought to add spending reductions to a version passed by the Senate in the early hours of 2013 which would probably have killed the compromise.
In the end, the House voted by 257 votes to 167 to pass the original bill with minority Democrats joining a smaller band of majority Republicans to pass the legislation after a fiercely contested and unusual session on New Year's Day.
Wall Street shares are now expected to bounce higher when the opening bell rings at 1430 GMT, dealers said.
"The fiscal cliff had dominated the agenda for both markets and US lawmakers in the run up to Christmas but with this now seemingly averted, equities are poised to break higher as the 2013 trading year gets underway," added analyst Fawad Razaqzada at trading group GFT Markets.
"Assuming Wall Street follows Europe's lead -- and there's little reason not to believe this will be the case -- then the gains we saw on Monday should find themselves being added to quite quickly."
Washington's fiscal cliff crisis has haunted financial markets throughout December amid concerns that it would drag the world economy into another lengthy downturn.
President Barack Obama, who campaigned for re-election on a platform of building a more equitable economic system, declared that the deal was a promise kept, despite falling short of earlier hopes for a grand deficit bargain.
"I will sign a law that raises taxes on the wealthiest two percent of Americans while preventing a middle class tax hike that could have sent the economy back into recession," Obama told reporters after the vote.
"The deficit needs to be reduced in way that's balanced. Everyone pays their fair share. Everyone does their part," Obama said, before heading to Air Force One to resume his interrupted annual vacation in his native Hawaii.
Had the deal splintered, all Americans would have been hit by tax increases and the spending cuts would have kicked in across the government, in a combined shock of $500 billion which could have rocked the fragile recovery.
Roland Jackson, AFP
Copyright Agence France-Presse, 2013
