SCOREBOARD: Cliff celebrations

US and European markets rose strongly overnight as investors cheered yesterday's successful budget vote in the US House.

US and European sharemarkets rose overnight following the passage of legislation by the Republican-controlled House of Representatives intended to stave off America's fiscal cliff.

US sharemarkets rose sharply after Congress passed legislation preventing the simultaneous lifting of taxes and cuts to government spending that could have led to a downturn of the economy. With just over an hour of trade to go the Dow Jones was up by 220 points or 1.7 per cent with the S&P 500 higher by 1.8 per cent and the Nasdaq up 70 points or 2.3 per cent.

US long-term treasuries fell (yields higher) as investors shifted away from safe-haven assets like government bonds in favour of equities and commodities. US 2-year yields were steady near 0.26 per cent and US 10-year yields rose by 8 points to 1.837 per cent.

European shares posted solid gains as investors celebrated the passing of the US budget legislation. The benchmark FTSEurofirst 300 index rose by 2.1 per cent to 20-month highs. The UK FTSE and German Dax were both higher by 2.2 per cent. And share prices of mining stocks soared as base metal prices miners lifted. Rio Tinto rose 5.1 per cent in London trade and BHP Billiton gained 3.7 per cent.

Major currencies were mixed against the US dollar in European and US trade as traders and investors digested news of the successful passing of US budget legislation. The euro eased from highs near $US1.3295 in early European trade to $US1.3155, and was around $US1.3170 in afternoon US trade. The Aussie dollar rallied over the Asian session, reaching US104.60c, before rising further to US105.20c in the US session but was softer near US104.85 cents in afternoon US trade. And the Japanese yen lifted from 87.30 yen per US dollar at the end of Asian trade to ¥86.94 and was around ¥87.12 in afternoon US trade.

Meanwhile, the US ISM manufacturing index rose from 49.5 to 50.7 in December (consensus 50.3 per cent). US construction spending fell by 0.3 per cent in November (consensus 0.6 per cent). And weekly chain store sales in the US rose 0.1 per cent, according to Redbook Research, to stand 2.9 per cent higher than a year ago.

In European data, the French Purchasing Managers index rose from 44.5 to a four-month high of 44.6 in December. But the German PMI eased from 46.8 to 46.0 in December.

Elsewhere, world crude oil prices rose on hopes of stronger global growth after the successful passing of US legislation. Firmer US economic data supported oil prices although partially offset by mixed European manufacturing figures. Brent crude rose by $US1.33 or 1.2 per cent to $US112.44 and Nymex crude rose by $US1.30 to $US93.12 a barrel.

Base metal prices posted solid gains between 2.9 to 4.5 per cent on the London Metals Exchange on Wednesday on the successful passing of US budget legislation. The gold price also rose in line with other commodities with the Comex gold futures price up by $13.00 or 0.8 per cent to $US1,688.80 per ounce. And the spot iron ore price was unchanged at $US144.90 a tonne.

Today brings auto sales data in the US, as well as weekly jobless claims.

Craig James is CommSec's chief economist. Adam Carr is on leave, returning January 7. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.

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