Tuesday, January 8, 2013
Wednesday, January 2, 2013
European shares jump on U.S. budget deal
* FTSEurofirst 300 up 1.3 pct, highest since May 2011
* Miners top gainers, copper up strongly
* Euro STOXX 50 volatility index drops 14 pct
By Tricia Wright
LONDON, Jan 2 (Reuters) - European shares rallied across the board at the start of the new year after U.S. lawmakers approved a deal to prevent a fiscal crunch that had threatened growth in the world's largest economy.
The Republican-controlled House of Representatives late on Tuesday finally approved a bill that will raise taxes on top U.S. earners, fulfilling President Barack Obama's re-election promise and avoiding $600 billion in broader-based tax hikes and spending cuts.
Asian shares rose strongly overnight on the news, while copper prices climbed 2.2 percent, with robust manufacturing data from top metals consumer China also aiding the mood.
The FTSEurofirst 300 rose 1.3 percent at 1,148.97 by 0914 GMT, hitting levels last seen in May 2011.
Uncertainty as to whether U.S. politicians would manage to hammer out a deal to avoid the fiscal cliff had cast a shadow over market sentiment in the last weeks of 2012.
"The U.S. news allows some apprehension to be reduced and although we have been confident of a deal being announced last minute we can now see more aggressive buying in today's session," Atif Latif, director of trading at Guardian Stockbrokers, said.
The Euro STOXX 50 Volatility Index, or VSTOXX, Europe's widely-used measure of stock market risk aversion, dropped 14 percent on Wednesday following the U.S. budget deal.
The VSTOXX - which is used to measure the cost of protecting stock holdings against corrections - tumbled to 18.45.
China's official manufacturing purchasing managers' index held steady in December at 50.6, matching November's seven-month high and adding to evidence of a move back toward growth in the world's biggest metals consumer.
That helped basic resources stocks put in a solid showing on Wednesday, the top performing sector with a 3.1 percent advance.
The euro zone's blue-chip Euro STOXX 50 firmed 49.54 points, or 1.9 percent, to 2,685.47.
The Euro STOXX 50 climbed 13.8 percent in 2012, while the FTSEurofirst 300 rose 13.2 percent, boosted by bold measures from central banks to resolve Europe's debt crisis and revive global growth.
Among technical strategists there was optimism as to how 2013 would proceed.
"We've started the year on a positive note, and it does look like the market is pushing on towards 2,722," Barclays Capital's chief European technical strategist Phil Roberts said, referring to the Euro STOXX 50.
The 2,722 level in technical analysis is an equality target - the point at which the rally from the low in 2011 to the high in March 2012 is replicated off the low in June 2012.
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CAR rebels say to join peace talks, halt advance
BANGUI | Wed Jan 2, 2013 4:28am EST
"I have asked our forces not to move their positions starting today because we want to enter talks in Libreville for a political solution," Seleka rebel spokesman Eric Massi told Reuters by telephone from Paris.
"I am in discussion with our partners to come up with proposals to end the crisis but one solution could be a political transition that excludes (President Francois) Bozize."
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TEXT-S&P:Ratings on Citigroup funding unaffected by merger
Jan 02 - Standard & Poor's Rating Services today said that Citigroup's announced merger of Citigroup Funding Inc., an intermediate holding company, with Citigroup Inc., the ultimate parent, does not affect the ratings on any of the debt issues from Citigroup Funding Inc. The ratings on these issues were based on a full and unconditional guarantee from Citigroup Inc. Any debt issues outstanding under Citigroup Funding Inc. will be assumed by Citigroup Inc. (A-/Negative/A-2).
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WRAPUP 13-United States avoids calamity in 'fiscal cliff' drama
* Obama wins victory in tax fight
* Vote caps weeks of budget wrangling
* House Republicans back away from plan to confront Senate
* Bill raises taxes on the wealthiest
By Andy Sullivan and Richard Cowan
WASHINGTON, Jan 1 (Reuters) - The United States averted economic calamity on Tuesday when lawmakers approved a deal to prevent huge tax hikes and spending cuts that would have pushed the world's largest economy off a "fiscal cliff" and into recession.
The agreement hands a clear victory to President Barack Obama, who won re-election on a promise to address budget woes in part by raising taxes on the wealthiest Americans. His Republican antagonists were forced to vote against a core tenet of their anti-tax conservative faith.
The deal also resolves, for now, the question of whether Washington can overcome deep ideological differences to avoid harming an economy that is only now beginning to pick up steam after the deepest recession in 80 years.
Consumers, businesses and financial markets have been rattled by the months of budget brinkmanship. The crisis ended when dozens of Republicans in the House of Representatives buckled and backed tax hikes approved by the Democratic-controlled Senate.
Asian stocks hit a five-month high and the dollar fell as markets welcomed the news. China's state news agency Xinhua took a more severe view, warning the United States must get to grips with a budget deficit that threatened not a "fiscal cliff" but a "fiscal abyss". Most of China's $3.3 trillion foreign exchange reserves are held in dollars.
The vote averted immediate pain like tax hikes for almost all U.S. households, but did nothing to resolve other political showdowns on the budget that loom in coming months. Spending cuts of $109 billion in military and domestic programs were only delayed for two months.
Obama urged "a little less drama" when the Congress and White House next address thorny fiscal issues like the government's rapidly mounting $16 trillion debt load.
There was plenty of drama on the first day of 2013 as lawmakers scrambled to avert the "fiscal cliff" of across-the-board tax hikes and spending cuts that would have punched a $600 billion hole in the economy this year.
As the rest of the country celebrated New Year's Day with parties and college football games, the Senate stayed up past 2 a.m. on Tuesday and passed the bill by an overwhelming margin of 89 to 8.
When they arrived at the Capitol at noon, House Republicans were forced to decide whether to accept a $620 billion tax hike over 10 years on the wealthiest or shoulder the blame for letting the country slip into budget chaos.
The Republicans mounted an effort to add hundreds of billions of dollars in spending cuts to the package and spark a confrontation with the Senate.
RELUCTANT REPUBLICANS
For a few hours, it looked like Washington would send the country over the fiscal cliff after all, until Republican leaders determined that they did not have the votes for spending cuts.
In the end, they reluctantly approved the Senate bill by a bipartisan vote of 257 to 167 and sent it on to Obama to sign into law.
"We are ensuring that taxes aren't increased on 99 percent of our fellow Americans," said Republican Representative David Dreier of California.
The vote underlined the precarious position of House Speaker John Boehner, who will ask his Republicans to re-elect him speaker on Thursday when a new Congress is sworn in. Boehner backed the bill but most House Republicans, including his top lieutenants, voted against it.
The speaker had sought to negotiate a "grand bargain" with Obama to overhaul the U.S. tax code and rein in health and retirement programs that are due to balloon in coming decades as the population ages. But Boehner could not unite his members behind an alternative to Obama's tax measures.
Income tax rates will now rise on families earning more than $450,000 per year and the amount of deductions they can take to lower their tax bill will be limited.
Low temporary rates that have been in place for the past decade will be made permanent for less-affluent taxpayers, along with a range of targeted tax breaks put in place to fight the 2009 economic downturn.
However, workers will see up to $2,000 more taken out of their paychecks annually with the expiration of a temporary payroll tax cut.
The non-partisan Congressional Budget Office said the bill will increase budget deficits by nearly $4 trillion over the coming 10 years, compared to the budget savings that would occur if the extreme measures of the cliff were to kick in.
But the measure will actually save $650 billion during that time period when measured against the tax and spending policies that were in effect on Monday, according to the Committee for a Responsible Federal Budget, an independent group that has pushed for more aggressive deficit savings.
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CAR rebels say to join peace talks, halt advance
BANGUI | Wed Jan 2, 2013 4:28am EST
"I have asked our forces not to move their positions starting today because we want to enter talks in Libreville for a political solution," Seleka rebel spokesman Eric Massi told Reuters by telephone from Paris.
"I am in discussion with our partners to come up with proposals to end the crisis but one solution could be a political transition that excludes (President Francois) Bozize."
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Euro STOXX 50 volatility index drops 14 pct
PARIS | Wed Jan 2, 2013 4:11am EST
The VSTOXX - which is used to measure the cost of protecting stock holdings against corrections - tumbled to 18.45, reversing most of a Dec. 28 surge that had been fuelled by fears a deal would not be struck.
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