RPT-GLOBAL MARKETS-Global stocks, commodities rise on US fiscal deal

Thu Jan 3, 2013 3:18am IST

* Global shares jump after U.S. Congress passes budget deal
    * Oil jumps as commodities join rally in risky assets
    * U.S. Treasury prices hit more than three-month high


    By Herbert Lash and Ryan Vlastelica
    NEW YORK, Jan 2 (Reuters) - Global stocks jumped 2 percent
or more and commodities rallied on Wednesday after U.S.
legislators struck a deal to halt a round of automatic fiscal
tightening that threatened to push the world's largest economy
into recession.
    The deal reached on Tuesday to avert the "fiscal cliff" put
off the immediate pain of income tax hikes for almost all U.S.
households but did nothing to resolve other political impasses 
on the budget that loom in coming months, including the debt
ceiling. 
    Oil prices pared some gains but Wall Street rallied at the
close, with the benchmark S&P 500 posting its best day in more
than a year. The CBOE Volatility Index, or VIX, a gauge
of investor anxiety, dropped 18.5 percent to 14.68 at the close.
The VIX has fallen 35.4 percent over the past two sessions. 
    The markets' reaction to the U.S. budget deal was a "sigh of
relief that a recession in the world's largest economy has been
averted," said Marc Chandler, global head of currency strategy
at Brown Brothers Harriman in New York. 
    Copper rose to its highest in more than two months, while
silver and platinum group metals also rose sharply. The S&P 500
achieved its biggest one-day gain since Dec. 20, 2011, pushing
the index to its highest close since Sept. 14.  
    The Dow Jones industrial average closed up 308.41
points, or 2.35 percent, at 13,412.55. The Standard & Poor's 500
Index rose 36.23 points, or 2.54 percent, at 1,462.42.
The Nasdaq Composite Index gained 92.75 points, or 3.07
percent, at 3,112.26. 
    Still, the rally may be short-lived. Spending cuts of $109
billion in military and domestic programs were only delayed for
two months, and a fight over the limit for U.S. government debt
also looms.
    "There was the fiscal cliff euphoria, but the markets are a
little overdone and people realize you still have the debt
ceiling battle, social security taxes going up and dealing with
spending sequestration and budget cuts," said Mark Waggoner,
president at Excel Futures Inc.
    The deal boosted investors' appetite for riskier assets and
depressed the U.S. dollar against major currencies. Brent crude
oil hit an 11-week high of nearly $113 per barrel and gold
prices rose nearly 1 percent.
    Brent February crude rose $1.36 to settle at
$112.47 a barrel, after reaching $112.90. U.S. crude for
February delivery rose $1.30 to settle at $93.12 a
barrel.
    The vote in Congress removed a major uncertainty hanging
over markets, but some analysts cautioned that the optimism
could fade if U.S. economic data later this week, including the
December payroll report, disappoints.
    U.S. manufacturing expanded slightly in December, bouncing
back from an unexpected contraction the prior month, according
to an industry report released on Wednesday. 
    The MSCI all-country world equity index rose
2.05 percent. The pan-European FTSEurofirst 300 closed
2.1 percent higher at 1157.40.
    In currency markets, the euro retreated after
reaching a two-week high earlier in the session to trade down
0.15 percent at 1.3183. The U.S. dollar rose 0.06 percent
against a basket of major currencies. 
    Prices of safe-haven government debt fell. Germany's Bund
future posted its biggest daily fall since early
September, settling down 1.57 points at 144.07.
    Yields on U.S. benchmark 10-year Treasury notes 
hit a more than three-month high, with the price falling 24/32
to yield 1.8406 percent. 
    Venezuela's U.S. dollar-denominated sovereign bonds rallied
across the yield curve on Wednesday in a sign of increased
appetite for risk. The benchmark 2027 Global bond 
gained 1.536 points in price to bid 99.79, yielding 9.273.
    The Thomson Reuters-Jefferies CRB index of 19
commodities rose 0.85 percent, with metals dominating gains.
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