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US markets rose on hopes for budget deal

12 Dec 2012 Evaluate

The US markets rose on Tuesday, with the S&P 500 Index gaining for a fifth consecutive session, buoyed by optimism that Republicans and Democrats will eventually reach a deal to prevent the automatic spending cuts and tax hikes set to go into effect early next year. The market however pared gains after Senate Democrat Leader Harry Reid stated that a deal to avoid the fiscal cliff will be difficult to reach before Christmas. The Ohio Republican also said his party was waiting for President Barack Obama to outline specific spending cuts. Congressional Republicans tried to increase pressure on the White House to produce a spending-cut plan as part of fiscal-cliff negotiations, in an attempt to shift the debate away from tax policy. Though, addressing the House of Representatives, Boehner stated that he was hopeful an accord would be reached. House Speaker John Boehner reiterated his call for Obama to offer proposed spending cuts as part of deficit-reduction plans.

Besides, the Federal Reserve is set to take more action this week to support financial markets and the economy, as the central bank tries to stay predictable given all the uncertainty surrounding the fiscal cliff. To accomplish this, the Fed may announce fresh monthly purchases of $45 billion of Treasuries. These new purchases will start in the New Year after the existing Operation Twist bond-buying program expires. Federal Reserve officials have also begun a two-day meeting to be followed by statements on the economy and monetary policy. In a speech late last month, Bernanke urged lawmakers to compromise and added that inaction to solve the budget deal is already affecting the economy.

In Europe, finance ministers from the 17 European Union countries that use the euro conferred on the results of a key bond buyback designed to ease Greece’s crippling debt load and unlock vital rescue loans. Besides, German investor confidence jumped more than forecast to a seven-month high in December on speculation Europe’s largest economy will gather momentum next year. 

The Dow Jones Industrial Average gained 78.56 points or 0.60 percent, to close at 13,248.40, the S&P 500 added 9.29 points or 0.65 percent, to finish at 1,427.84, while the Nasdaq rose by 35.34 points or 1.18 percent, to end at 3,022.30.

Indian ADRs closed mostly in red on Tuesday, Tata Motors was down by 0.48%, ICICI Bank was down 0.42% and Dr. Reddy’s Lab was down 0.34%. On the other hand, Sterlite Industries was up 0.06% and MTNL was up 0.05%.

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