Milan, other European markets rally on good news out of U.S.

Agreement to avoid 'fiscal cliff' cheers investors

Milan, other European markets rally on good news out of U.S.

Milan, January 2 - Italy's leading financial market took a dramatic jump on the first day of 2013 trading Wednesday, buoyed by good news out of the United States. On the Milan Stock Exchange, the FTSE Mib surged by 3.81% to close at 16,893 points. Financial markets across Europe showed strong gains on news that legislators in the United States found the necessary compromises to avoid the so-called "fiscal cliff" of billions of dollars in austerity measures that were due to kick in this week. Experts feared that if a deal had not been reached, the massive US economy could have been plunged into recession. The deal raises tax rates on wealthier households, extends unemployment benefits, and delays across-the-board spending cuts for two months. But it also allows a 2% cut to payroll taxes to lapse. Meanwhile, the spread between Italy's benchmark 10-year bond and its ultra-safe German counterpart closed Wednesday at 283 basis points. That was just below a landmark policy goal of a 287-point spread set by outgoing premier Mario Monti - a figure exactly half the level of the spread in November 2011, when Monti took over from Silvio Berlusconi. At that time, Italy was at the centre of the eurozone debt crisis, and confidence in the Italian economy was very low. At close of trading Wednesday, the yield on 10-year Italian paper fell to 4.27%, its lowest since at least December 2010. When economist and former European commissioner Monti took the helm from Berlusconi, the yield was stuck at the long-term unsustainable mark of 7%. In other European markets, Frankfurt's DAX closed higher, up by 2.19% to reach 7,778.78 points, while London's FTSE 100 jumped by 2.13% to close at 6,023.70 points, Paris's CAC 40 gained 2.6% to close at 3,733.93 points, and Spain's IBEX 35 ended the day 3.12% higher at 8,422.60 points.

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