World markets rise as US avoids the cliff

STOCK markets around the world rallied yesterday on hopes that 2013 will be a better year for the global economy than feared.

Shares soared on Wall Street, in Europe and across Asia after a shortterm fix was found to stop the US plunging over the so-called fiscal cliff.

Investors also welcomed a recovery in global manufacturing with solid output gains recorded in China, the US and Britain but not the eurozone.

The FTSE 100 index rose 2.2pc to an 18-month high of 6027.37 in London – the first time it has closed above 6000 since July 2011.

The Paris stock market was up more than 2.5pc and Frankfurt rose 2.2pc while the Hang Seng jumped 2.9pc to a 19-month high in Hong Kong.

In New York, the Dow Jones Industrial Average closed up 308.41 points to 13,412.55 despite warnings that the US debt crisis was far from over.

‘Many investors are feeling confident heading into 2013 following a year of strong equity market returns and the recently signed deal [to avert the fiscal cliff],’ said Jonathan Golub, a strategist at UBS in New York.

But London-based financial analyst Louise Cooper said it was nothing more than ‘a relief rally for a fudged and incomplete deal’ that failed to address America’s towering debts.

She added: ‘Clearly a strong first day of trading for 2013 could be expected but the deal is only a temporary plaster to America’s problems. I fear the City is a little light-headed.’

Miners were the biggest risers in London as investors bet that a sustained global recovery will boost demand for commodities.

JP Morgan’s global manufacturing index, where anything above 50 represents growth, rose from 49.6 in November to 50.2 in December – the first expansion in seven months.

A series of reports showed factory output rose in Britain, Ireland, the US and China last month. But production fell sharply in the eurozone. Bank stocks across Europe rose, with Barclays up more than 5pc, Lloyds nearly 4pc and HSBC and RBS around 3pc, on relief that the US did not topple over the fiscal cliff of automatic spending cuts and tax rises scheduled for New Year’s Day.

Kevin Burrowes, financial services expert at PwC, said: ‘UK banks will breathe a sigh of relief as the threat of the biggest economy slipping back into recession diminishes. UK banks have a large presence in the US and make a significant contribution to the economy.’