HONG KONG — Stock markets in the Asia-Pacific region began the year with gains Wednesday, as investors took some relief from the last-minute fiscal deal reached in Washington but wrestled with the lingering uncertainties about many other aspects of the U.S. budget.
Two important markets, Japan and China, remained closed for holidays Wednesday, but elsewhere in the region, markets gained modestly during the morning and climbed further after a crucial vote in Washington passed a compromise deal that staved off income tax increases for most Americans.
The Hang Seng index in Hong Kong had the biggest increase, closing up 2.9 percent at its highest level since June 2011. In South Korea, the Kospi rose 1.7 percent, while the benchmark indexes in Singapore, Australia and Taiwan climbed more than 1 percent.
European markets also headed solidly higher, with the DAX in Germany, the CAC-40 in France and the FTSE 100 up about 2 percent in the late morning.
With the Chinese economy having regained momentum in recent months, Asian economic prospects are relatively positive, and growth in most of the region’s developing economies is expected to outpace expansion in the beleaguered West and in Japan.
Purchasing managers’ index reports from Taiwan, South Korea and India, which gauge the health of the manufacturing sectors in those countries, underlined the improving picture Wednesday, with readings that climbed in December. The reading for Indonesia slipped but still indicated expansion.
But in Europe, similar surveys showed that euro zone factories had ended 2012 in poor shape, with both production and new orders declining in December. Spanish manufacturing shrank for the 20th consecutive month, with the decline and the pace of job cuts accelerating.
Analysts have long cautioned that the economic and budget travails of the United States and Europe were likely to overshadow global market sentiment and could cast a pall over Asia this year, especially in highly trade-dependent countries like Taiwan and South Korea and small, open economies like Singapore and Hong Kong.
The deal reached in Washington on Tuesday averted looming income tax increases for most Americans. Combined with significant spending cuts, these would have dealt a major blow to an economy that has been growing anemically since the global financial crisis.
Market relief, however, was likely to be short-lived, analysts said, as other important issues have not been tackled. In particular, decisions on spending cuts of $110 billion were delayed for two months, and politicians have not come up with a long-term solution that would allow the U.S. government to get past the borrowing limit known as the debt ceiling, which was reached at the end of the year.
The scaled-down deal “addressed the fiscal cliff but did nothing to address longer-term fiscal health of the nation,” Aneta Markowska, an analyst at Société Générale in New York, wrote in a research note sent before the final vote in the House of Representatives on Tuesday night in Washington. “This puts the U.S. rating at risk for a downgrade.”
Broader tax overhauls also remain on the table for 2013, while the negotiations about the debt ceiling are likely to involve more potentially unsettling brinkmanship in Washington.
The U.S. fiscal problems, noted Tom Kenny, an analyst at Australia & New Zealand Banking in Australia, “are far from over.” U.S. politicians, he added, will face intense negotiations over the next two months about raising the debt ceiling. These “are likely to prove more harrowing than those just completed.”
For financial markets, the last-minute, partial deal reached Tuesday is thus likely to have brought only a temporary reprieve, analysts said.
“Call it breathing room, call it kicking the can down the road, call it whatever you like — come mid-February, when the decision on the legal U.S. debt limit will be needed, the fight starts afresh,” analysts at DBS in Singapore wrote in a research note. “Two more months of shenanigans and waffling/seasick markets? It certainly looks that way.”
David Jolly contributed reporting from Paris.
Global Markets Rise on Fiscal Deal
This article
Global Markets Rise on Fiscal Deal
can be opened in url
http://asphaltnews.blogspot.com/2013/01/global-markets-rise-on-fiscal-deal.html
Global Markets Rise on Fiscal Deal
