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

Wed Jan 2, 2013 3:10pm EST

* Global shares jump after U.S. Congress passes budget deal
    * Dollar down, euro rises on increase in risk appetite
    * Oil jumps as commodities join rally in risky assets


    By Herbert Lash and Ryan Vlastelica
    NEW YORK, Jan 2 (Reuters) - Global stocks surged 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. 
    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 more than 1 percent to a two-week high.
    Brent February crude rose $1.36, or 1.22
percent, to settle at $112.47 a barrel, having traded from
$111.27 to $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 Dow Jones industrial average was up 237.95
points, or 1.82 percent, at 13,342.09. The Standard & Poor's 500
Index was up 27.91 points, or 1.96 percent, at 1,454.10.
The Nasdaq Composite Index was up 79.04 points, or 2.62
percent, at 3,098.55. 
    The MSCI all-country world equity index rose
1.74 percent. The pan-European FTSEurofirst 300 closed
2.1 percent higher at 1157.40.
    In currency markets, the euro was at $1.3173 after
reaching a two-week high earlier in the session. The U.S. dollar
rose 0.1 percent against a basket of major currencies. 
    It was a similar story for government debt, with prices of
higher-yielding Spanish and Italian bonds up and the German
equivalent, usually favored by risk-averse investors, falling.
The Bund future was on track for its biggest daily fall
since September, down 1.62 points to 144.02.
    The benchmark 10-year U.S. Treasury note was
down 23/32 in price to yield 1.8371 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.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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