Spread Betting Buying Frenzy as US Avoids the Fiscal Cliff
At the very last minute, US politicians finally managed to carve out a deal to avoid the fiscal cliff and so we are starting the New Year on a slightly firmer footing.
Most expected something to be agreed but there were no surprises that negotiations went down the wire. We've seen it all before when the fiscal cliff
was first created back in 2011.
Many will be relieved that the world's biggest economy will not suffer from the sharp tax rises and deep spending cuts that were due to be imposed at the start of the year. This will be particularly true as it allows the threat of recession to be brushed aside for now.
Unsurprisingly, risk assets are in demand this morning as investors dive back into equities.
It seems as though the buyers have the wind in their sails and we are within touching distance of the 6000 level.
At the European open, the FTSE has jumped back to its mid-December highs as it trades up some 80 points at 5980.
Everything is being bought and there aren't even a handful of UK shares
that are falling. From defensives to more cyclical stocks
, there's a bit of a buying frenzy going on.
It will be interesting to see if the index can finally close above its 2012 closing high of 5965.
The problem is that all the US has actually managed to do is copy the Europeans by kicking the can down the road.
Delaying the spending cuts by a couple of months simply means that we will have more negotiations in a few weeks time that will cover the same old ground.
Having spent much of the past few years telling Europe to sort out their fiscal difficulties, the US has not practiced what it's preached.
The patchwork agreement seems to have set the tone for the rest of this year, which now seems likely to be dominated by a continuation of both the Eurozone crisis and the US fiscal problems.
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By Simon Denham, 2 January 2013