“Cliff” optimism boosts markets

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Both US and Asian shares inched higher as optimism grew for a “fiscal cliff” deal as President Barack Obama yesterday met with his Republican counterpart, House of Representative Speaker, John Boehner. Obama presented a counter-offer to the Republicans that is said to include a major change in position on tax hikes for the wealthy in efforts to hammer out a compromise to avert steep tax hikes and indiscriminate spending reductions set for the beginning of 2013.

According to informed sources the White House in a dramatic change of position has proposed leaving lower tax rates for everyone except for those earning above USD 400 000. That is up from the former threshold of USD 250 000 proposed by the President, but still far from the Republican proposal of USD 1 million. Obama is also said to be willing to compromise on budget cuts and revenue figures.

The rumors on movement in the negotiations had the US stock indexes to soar led by financials and other growth-orientated sectors. Bank of America jumped by 3,97 % followed by other major blue chips as Home Depot, JP Morgan, General Electric and Sisco. Dow Jones were up 0,76 % to 13 235. Nasdaq rose 1.32 % and ended at 3010 again passing the 3000 threshold. The positive trend continued in Asia this morning where Australian shares outperformed with a 0,7 percent increase. Also Nikkei, Shanghai and the MSCI index for Asian Pacific rose.

The more optimistic market attitude had a positive impact on commodities and precious metals. Oil prices led by Brent crude are up to 108,18 and gold again passed the USD 1700 ounce level after falling back to below 1690. The pressure on Yen following the Japanese elections continues. USD/JPY is trading at 83,98 after reaching 84,48 on Monday. The dollar has probably still an upside against yen prior to the Central Bank of Japan’s meeting later this week. Prime Minister Abe’s comments yesterday strengthened the assumption that BOJ would initiate monetary easing. EURO/USD stands at 1.3170, in line with the new higher level seen established in relation between USD and Euro. The Euro countries principle decision to establish a banking union has positively impacted the strength of the Euro.

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