World markets are opening 2013 on a high note, after the U.S. Congress reached a deal to avert an early 2013 financial crisis that threatened to send the world’s largest economy into recession.
In the U.S., key stock markets all jumped 2 percent or more in the first half hour of trading Wednesday. Stocks also were surging in Europe, with markets in London, Frankfurt and Paris all advancing more than 2 percent in afternoon trading.
Earlier, Asian markets welcomed the U.S. legislative action in the first trading of the new year, with Hong Kong ending up 2.9 percent, Sydney gaining 1.2 percent, and Seoul adding 1.7 percent. Markets in Japan and China were closed for public holidays.
Major concerns loom
Late Tuesday, the House of Representatives cleared a deal to avoid $500 billion in spending cuts and tax increases, endings weeks of quarreling that had overshadowed global markets. Analysts say, however, the deal will provide short-term certainty, but will not do much to address investor concerns about the future since decisions on large spending cuts were delayed two months.
British financial strategist David Buik of the Cantor Index said he is concerned that the U.S. reached its $16.4 trillion borrowing limit on Monday and will also have to decide in the coming weeks whether to increase the debt ceiling. Without the ability to borrow more money, the U.S. would face an unprecedented circumstance — running out of money to avoid defaulting on some of its financial obligations.
“We have avoided it (the ‘fiscal cliff’), but it is a fudged deal and I think anybody who thinks that it’s anything else probably deludes themselves. I think we are going to hit problems again come February when President Obama presents his budget for 2014. Clearly one of the issues in that is going to be the debt ceiling and the budget deficit, which clearly at $16.4 trillion is wholly unacceptable,” Buik stated.
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