LONDON: Britain's top share index jumped higher on the first trading session of 2013 after US lawmakers approved a deal preventing massive tax hikes and spending cuts, boosting the outlook for the new year.
The Republican-controlled House of Representatives late on Tuesday finally approved a bill that will raise taxes on top US earners, fulfilling President Barack Obama's re-election promise and avoiding the "fiscal cliff" of $600 billion in broad-based tax hikes and spending cuts which threatened to drag the US economy into recession.
At 0832 GMT, the FTSE 100 index was up 80.39 points, or 1.4 percent, at 5,978.20, having ended a thinly traded half-day session on Monday, New Year's Eve down 0.5 percent as traders awaited news on the negotiations.
"Investors are trading with a sense of relief this morning after lawmakers in Washington agreed on a compromise to avoid the fiscal cliff that has been the dominant theme in equity markets since the Presidential elections back in November," Mike McCudden, Head of Derivatives at stockbroker Interactive Investor said.
"There will no doubt be a few more twists and turns in the days ahead as the bears pour over the detail of the compromise that has been struck on Capitol Hill but for now investors have the concrete news they were hoping for," McCudden added.
Asia stocks rose strongly, copper prices hit a two-week high, and Brent crude reached a one-month peak on Wednesday after the deal, with upbeat manufacturing data from top commodities consumer China also helping.
China's official manufacturing purchasing managers' index held steady in December at 50.6, matching November's seven-month high, adding to evidence that the world's second-largest economy was headed towards a steady revival in growth.
Miners led the blue-chip gainers, contributing almost 20 points of the FTSE 100's advance, boosted by the jump in commodity prices.
Banks were also in demand, with Barclays the top blue-chip gainer, up 4.0 percent, with traders saying the stock was also helped by a price target hike from Investec Securities to 285 pence, up from 260 pence.
Center>Copyright Reuters, 2013
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