RELIEF at America’s deal to avert a budget crisis sent London’s FTSE-100 smashing through the 6,000 mark for the first time since July 2011.
The London market closed up 2.13% at 6,023 on the news that a deal struck in Washington in the early hours of New Year’s Day meant there would be no automatic tax rises and spending cuts in the US, something that many had feared would send the country’s tentatively recovering economy hurtling back into recession.
The news was widely welcomed by the region’s stockbroking community, but many also warned that Tuesday morning’s deal was only a temporary fix.
Carl Cross, investment director at private wealth management firm Investec, said: “There is a question mark about how sustainable it is and whether further negotiations are needed. It would have been a huge threat to the economy, so the fact that Republicans and Democrats have come to a deal is a positive, but it has only postponed the need to address the spending issues.”
Nigel Hibbert, a partner in the Liverpool office of Cheviot Asset Management, said: “It’s a welcome start to the year. It’s a widely held opinion that conditions are set fair for progress in equity markets this year. The markets moved quickly, but they didn’t really get too jittery about the lead up to the deadline. They were fairly confident, perhaps even complacent, that a deal would be done, so it’s surprising they are as bright as they were today.”
Derek Gawne, branch manager at the Liverpool office of Charles Stanley, said: “The reaction is not surprising because of the brinkmanship involved, but the problem is that the market is looking only at America at this time. The other issues of Europe and China’s slowing down will come back to the fore again.”