Failure to avert the looming cliff, which involves $600 billion of tax hikes and spending cuts, may lead the world’s biggest economy into a recession in the first half of 2013.
The UK’s FTSE lost 10 points (-0.2%) to settle at 5912 whilst Germany’s DAX climbed eight points (+0.1%) to settle at 7605. France’s CAC fell five points (-0.1%) to settle at 3638.
Markets rallied in the US with the Dow Jones rising 100 points (+0.8%) to settle at 13235 whilst the S&P added 17 points (+1.2%) to settle at 1430. The Nasdaq climbed 39 points (+1.3%) to settle at 3011.
In the commodity space, crude oil for January delivery rose $0.47 to settle at $87.20 a barrel for the same reasons US equity markets rallied. Gold futures for February delivery added 0.1% to settle at $1698.20 after a bigger-than-expected contraction in New York’s manufacturing was reported.
The Fed Bank of New York mentioned that its general economic index fell to -8.1. In the currency space, the yen fell against the US dollar after Mr. Shinzo Abe’s Liberal Democratic Party, in favour of more aggressive monetary policies, won majority of the seats in parliament. The euro traded higher after ECB President, Mario Draghi, said that he expects the eurozone to make a recovery in the second half of 2013.
The US dollar traded higher against most of its peers as investors sought the currency’s safety since marked progress is yet to be made in the US budget discussions. There is no major local economic data slated for release today.