Europe’s main stock markets climbed yesterday as investors welcomed signs of progress in talks on a new deficit-cutting budget to avoid the so-called fiscal cliff in the United States, dealers said.
At closing, London’s benchmark FTSE 100 index of leading shares rose 0.40 per cent to 5,935.9 points, Frankfurt’s DAX 30 added 0.64 per cent to 7,653.58 points, while in Paris the CAC 40 was 0.14 per cent higher at 3,648.63 points.
Milan’s FTSE Mib index added 0.94 per cent to 16,155 points, as a key budget vote was delayed to Wednesday, while Madrid’s IBEX 35 gained 0.95 per cent to 8,117.0 points.
On the secondary bond markets the 10-year benchmark yields for crisis struck Spain and Italy eased on improved investment sentiment towards eurozone risk.
The European single currency rose to $1.3224, up sharply from $1.3161 late in New York on Monday. Gold prices slumped to $1,694 an ounce on the London Bullion Market, from $1,695.75.
US stocks also moved higher yesterday amid signs of progress to avert the “fiscal cliff,” the potential for automatic tax increases and spending cuts on January 1 that could send the US economy into a slump.
In midday trade, the Dow Jones Industrial Average was up 0.57 percent, the broad-market S&P 500 points gained 0.82 per cent, while the tech-rich Nasdaq Composite climbed 1.07 per cent.
“The market appears taken with the idea that new proposals are at least being advanced by both sides that differ from prior versions, suggesting last week’s stalemate in the negotiation process has ended,” said Briefing.com’s Patrick O’Hare.
In company news, Rolls-Royce shares rallied 2.39 per cent to 880 pence in London after it confirmed a $1-billion contract with Japan’s Skymark Airlines for Trent 900 engines to power six Airbus A380 aircraft.
Shares in Airbus-maker EADS shot up 2.59 per cent to €29.87 also boosted by an order by Turkey’s Pegasus Airlines for 100 A321neo passenger jets.
Asian equities mostly rose yesterday, taking a lead from Wall Street as dealers grow confident US lawmakers will reach an agreement.
Politicians are seeking to break the deadlock and avert automatic taxation hikes and spending cuts that are due to come into effect on January 1 in the United States.
Experts fear that the fiscal cliff package, estimated to represent $600 billion, could tip the world’s biggest economy back into recession.
Any indication that there is some movement in the budget negotiations and that the two parties are making an effort to find a solution “is enough to keep markets moving higher,” said ETX Capital trader Markus Huber.
President Barack Obama hosted top Republican lawmaker John Boehner in the White House for 45 minutes on Monday in the latest effort to avert a potentially disastrous deadlock.
The meeting follows news that Boehner had changed his position on not allowing any more taxes, saying at the weekend that he would agree to some hikes for people earning more than $1 million.