Stock markets welcome US's last-minute 'fiscal cliff' solution

House of Representatives vote through bill that raises taxes for only the richest Americans

LAST UPDATED AT 11:30 ON Wed 2 Jan 2013

STOCK MARKETS soared today on the news that America had stepped back from the edge of the 'fiscal cliff', and in London the FTSE 100 reached the 6000 mark for the first time since July 2011.

A bill already passed in the US Senate was voted through by 257 votes to 167 in the US House of Representatives late last night. It raises taxes on the wealthiest Americans (those earning above $400,000 a year) and delays a decision on public spending cuts by two months, thus averting the approaching nightmare of automatic tax rises and spending cuts across the board.

The Daily Telegraph reports that Asian markets rose in relief, with Hong Kong shares up by 2.9 per cent. South Korea's Kospi added 1.7 per cent and Singapore's Straits Times index 1.3 per cent. As the BBC reports, financial markets in Japan and mainland China were closed for a public holiday.

But the positive reaction continued in Europe, where the FTSE rose 1.8 per cent on early trading and broke the 6000-point barrier for the first time in 18 months. Elsewhere Germany's Dax rose two per cent and the Cac in France was up 1.7 per cent according to The Guardian. Even the struggling eurozone countries benefited, with the Athens market up 1.3 per cent, Italy 2.6 per cent higher and Spain up 1.9 per cent.

The bill in America will stop extended unemployment benefits for an estimated two million jobless from running out, renew tax breaks for businesses and renewable energy purposes, block a 27 per cent cut in fees for doctors who treat elderly Medicare patients and stop a $900 pay increase for lawmakers from taking effect in March.

The bill will raise the top tax rate on large estates from 35 per cent to 40 per cent. Taxes on capital gains and dividends will also rise. Spending cuts of $24 billon set to take effect over the next two months are postponed.

There was regret in Washington that the deal thrashed out by Vice President Joe Biden and the Senate’s Republican minority leader Mitch McConnell was narrowly drawn and fell short of the sweeping bill hoped for which would have combined tax changes and spending cuts to reduce the national deficit. · · 

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