Fiscal cliff hopes give markets a lift
Obama says compromise could even be done quickly.
LONDON — Rising hopes that US politicians are close to agreeing on a crucial budget deal that could keep the world’s largest economy from sinking back into recession shored up markets Dec. 6, ahead of a policy meeting of the European Central Bank.
President Barack Obama and House of Representatives Speaker John Boehner spoke Wednesday for the first time in days in a telephone discussion on the so-called “ fiscal cliff,” the automatic spending cuts and tax increases that would kick in at the start of next year if no budget deal is agreed.
Obama said a compromise was “not that tough” and could even be done quickly, raising the possibility that broader negotiations will soon resume between the White House and congressional leaders.
“Optimism has been dealt a positive hand following reports yesterday that US policy officials are moving closer to a deal, which could even be completed next week, in order to avoid the fiscal cliff,” said Shavaz Dhalla, financial trader at Spreadex.
In Europe, the FTSE 100 index of leading British shares was up 0.3% at 5,911 while Germany’s DAX rose 1.1% at 7,535. The CAC-40 in France was 0.5% higher at 3,610.
Wall Street was poised for a solid opening, with both Dow futures and the broader S&P 500 futures up 0.2%.
As well as monitoring US budget developments, investors will be interested to hear what ECB President Mario Draghi says in his press conference after the conclusion of the governing council’s monthly meeting. Even though the economy of the 17 European Union countries is in recession – confirmed in updated figures Dec. 6 – the ECB is widely expected to keep its main interest rate unchanged at the record low 0.75%.
In the run-up to the briefing, the euro was flat at $1.3070.