January 2, 2013

Global financial markets rally after 'fiscal cliff' deal

Financial markets around the world started 2013 with hefty gains as investors welcomed Washington's last-minute deal not to go over the so-called "fiscal cliff."

The Associated Press

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"Nothing to dent the positive risk start to the year here," said Alan Ruskin, an analyst at Deutsche Bank.

While the evidence points to continued economic growth in the U.S., figures elsewhere highlighted the scale of the downturn in the economy of the 17 European Union countries that use the euro.

The manufacturing purchasing managers' index — a gauge of business activity published by data provider Markit — showed the industrial sector remained mired in recession in December. The index for the eurozone fell to 46.1 from 46.3 the previous month. Anything below 50 indicates a contraction in activity.

How the European economy fares over the coming months will likely hinge on developments in the debt crisis. In the last few months of 2012, tensions eased largely in the wake of the announcement of a new bond-buying plan from the European Central Bank.

That shored up the euro, which eked out further gains Wednesday as investor sentiment was buoyant in the wake of the fiscal cliff deal. When investors have a propensity to take on riskier assets, the dollar often loses ground. The euro was up 0.5 percent at $1.3258.

Oil prices also pushed higher, with the benchmark New York contract up $1.74 at $93.56 a barrel.

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