Business, Finance & Economics

Stock markets soar on fiscal cliff deal news

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Traders work on the floor of the New York Stock Exchange on January 2, 2013 in New York City. A day after U.S. lawmakers reached a last minute agreement to avert the fiscal cliff, U.S. stocks surged as traders around the globe felt renewed confidence over global markets.

Credit:

Spencer Platt

Stock markets in the United States and around the world rallied on Wednesday, after US lawmakers reached an agreement to avert the fiscal cliff, a package of automatic spending cuts and tax hikes.

The Dow Jones Industrial Average closed at 308 points, a 2.4 percent jump, to 13412, according to The Wall Street Journal. The S&P 500 climbed 36 points, or 2.5 percent, while the Nasdaq Composite jumped 3.1 percent, or 74 points, to hit 3112.

The Associated Press reported that benchmarks in Asia and Australia soared on the first day of trading of 2013. Hong Kong's Hang Seng index jumped 1.9 percent to 23,089.94, while Australia's S&P/ASX 200 increased 1.3 percent to 4,707.90. South Korea's Kospi jumped 1.5 percent to hit 2,027.00.

Markets in Singapore, India, Thailand, Indonesia and Taiwan also rose, said the AP.

In Europe, the FTSE 100 index jumped 2.3 percent in the UK, while the CAC-40 in France rose 2.2 percent and Germany's DAX jumped by 2.13 percent, according to USA Today.

The New York Times noted that the rallies might be temporary as US Congress did not address certain fiscal disagreements in its eleventh-hour deal. Spending cuts of $110 billion were postponed for two months, and there has been no long term solution worked out for the debt ceiling, the borrowing limit reached at the end of 2012.

"We keep stumbling from patchwork solution to patchwork solution, without getting us to the longer term solutions we need," Michael Gapen, the head of economic research for the US at Barclays, told The Times.

Despite the deal, however, taxes will go up for the average American household. NBC News noted that the biggest impact would be the expiration of the payroll tax holiday, amounting to two percent of wages.

Without the fiscal cliff deal, taxes would have jumped by an average of $3,500 per household. With the deal, they are likely to rise by about $25 a week.

More on GlobalPost: 3 more fiscal cliffs the US faces in 2013