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GLOBAL MARKETS-Shares at 3-mo high on US 'fiscal cliff' optimism
December 18, 2012 / 3:45 PM / in 5 years

GLOBAL MARKETS-Shares at 3-mo high on US 'fiscal cliff' optimism

4 Min Read

* World shares at highest level since September
    * Wall St ticks higher on hope for 'cliff' progress
    * Euro edges higher vs dollar
    * Oil, copper, gold rise on improving growth sentiment

    By Angela Moon
    NEW YORK, Dec 18 (Reuters) - Signs of compromise in U.S.
talks to stop automatic tax hikes and spending cuts hurting the
economy next year pushed world shares to their highest level
since September on Tuesday and weakened investor appetite for
safe-haven bonds and the dollar.
    Wall Street opened slightly higher as investors continued to
expect a deal would be reached to avert the "fiscal cliff,"
though caution remained in the absence of any concrete progress.
    Gains were limited following a steep rally in the previous
session, which lifted the S&P 500 to its highest in nearly two
months, but hopes for a deal grew on signs of compromise between
the major political parties in Washington.
    "We've been getting a series of snippets suggesting
accommodation from both Boehner and Obama, which is feeding the
sense in markets that we could get a deal," said Michael
Holland, chairman of Holland & Co in New York.
    Investors have been reluctant to make big bets in the face
of the uncertainty over the budget.
    "You can never discount the possibility that the government
will do something dumb and screw this up, but right now the
market is happy over the prospects for a deal," said Holland,
who oversees $4 billion in assets.
    The political divide narrowed on Monday night when President
Barack Obama proposed leaving lower tax rates in place for those
earning under $400,000, moving closer to the $1 million
threshold favored by Republican House of Representatives Speaker
John Boehner. 
    The Dow Jones industrial average was up 52.22 points,
or 0.39 percent, at 13,287.61. The Standard & Poor's 500 Index
 was up 7.60 points, or 0.53 percent, at 1,437.96. The
Nasdaq Composite Index was up 21.77 points, or 0.72
percent, at 3,032.37. 
    European shares rose close to 2012 highs on Tuesday, with
the FTSEurofirst 300 index up 0.48 percent at 1,138.01.
The rally pushed the MSCI index of global stocks 
up 0.5 percent, its highest level since September, with an
18-month peak also in sight.
    The euro hovered near a 7-1/2-month high against the dollar
on the signs of progress in the U.S. budget talks and generally
improving investor sentiment on euro zone assets, while market
players sold the safe-haven dollar.
    The euro was last up 0.1 percent on the day at
$1.31808, near a 7-1/2 month high of $1.3191 hit on Monday. The
dollar index slipped to a two-month low of 79.606. 
    Brent crude rose 68 cents to $108.32 a barrel while
U.S. crude oil gained 54 cents to $87.74 a barrel. It
climbed above the 50-day moving average, a key technical
indicator watched by traders, for the first time since early
    In bond markets, trading remained subdued ahead of the
year-end. U.S and German government bonds futures slipped as
increasing signs of progress in the U.S. budget talks eased
demand for low-risk assets. 
    The benchmark 10-year U.S. Treasury note was
down 6/32, with the yield at 1.7926 percent.  
    Sweden cut its interest rates back to 1 percent and Turkey
cut rates for the first time in more than a year, while India's
central bank reiterated its guidance of further easing in the
first quarter of 2013.  
    Concerns that new fiscal stimulus could seriously increase
the country's debt burden pushed the benchmark 10-year Japanese
government bond yield to a one-month high of
0.750 percent. 
    With thin trade accentuating moves, Spanish debt extended
gains after a final bill sale of the year raised more than the
target amount. 
    Spanish 10-year bond yields fell 7.5 basis
points to 5.38 percent while the equivalent Italian debt
 fell 8 bps to 4.49 percent, back to where it was
before Prime Minister Mario Monti sparked a wave of selling
earlier this month by announcing he would resign early.

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