Europe’s stock markets advanced yesterday after a late bout of optimism that politicians would act to avoid the looming “fiscal cliff” of automatic tax rises and spending cuts which threatens to send the United States back into recession.

After having spent most of the day in negative territory, optimistic comments by US politicians helped London’s FTSE 100 index of leading companies close with a 0.06 per cent gain at 5,803.28 points.

In Frankfurt, the DAX 30 added 0.15 per cent to 7,343.41 points, while in Paris the CAC 40 rose 0.37 per cent to 3,515.19 points.

However Madrid’s IBEX 35 slid 0.33 per cent to 7,837.60 points after Spain’s nationalised Bankia said it would cut 6,000 jobs, about 28 per cent of its staff, by 2015.

Meanwhile oil prices fell yesterday as investors focused on key budget talks in the US, the world’s biggest consumer of energy, and reacted to news of an unexpected drop in US crude inventories.

New York’s main contract, West Texas Intermediate (WTI) for delivery in January, slid $1.10 to $86.08 a barrel. Brent North Sea crude for January shed $1.07 to $108.80 a barrel in late London deals.

US stocks also see-sawed on fiscal cliff comments. In mid-day trade the Dow Jones Industrial Average was up 0.08 per cent to 12,888.27 points.

The S&P 500-stock index dipped 0.03 per cent to 1,398.50 points, while the Nasdaq Composite slid 0.07 per cent at 2,965.85 points.

European equities had risen on Tuesday as investors cautiously welcomed a bailout deal for Greece which eased worries over a bankruptcy for the indebted eurozone country.

Markets then ran out of steam as fiscal cliff worries overshadowed the Greek debt deal and encouraging US economic data.

Investors ran for cover after the Senate Majority Leader Harry Reid said “little progress” had been made in cross-party talks on the looming tax hikes and spending cuts due to come in on January 1.

Reid’s comments raised the spectre of another long battle between Republicans and Democrats, similar to last year’s row over raising the country’s borrowing cap, which led to the United States losing its top-level AAA credit rating.

In foreign exchange deals yesterday, the euro slipped to $1.2923 from $1.2938 late in New York on Tuesday, when the European single currency had briefly soared following the Greek deal.

On the London Bullion Market, gold prices dropped to $1,708 an ounce from $1,746.25 Tuesday.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.