Asian markets are responding positively after the United States Congress passed a deal late Tuesday to end the so-called “fiscal cliff” crisis that threatened to plunge the world's largest economy into recession.
Hong Kong was up 1.9 percent, Seoul rose 1.4 percent, and Sydney saw a 1.26 percent gain in trading Wednesday, as the House of Representatives cleared the Senate-passed deal to avoid $500 billion in spending cuts and tax increases. Markets in Japan and China were closed for public holidays.
Prolonged political quarrels over how to solve the crisis had overshadowed global markets in the final weeks of 2012. Although the deal provided short-term certainty for investors, many observers predicted a muted reaction, since U.S. lawmakers delayed a tough decision on looming spending cuts.
Under the plan, Republicans and Democrats have two months to find a compromise deal to avoid mandated cuts to defense and domestic spending that analysts say would rock the U.S. economic recovery. The bill also failed to resolve the issue of whether lawmakers will choose to raise the U.S. debt ceiling.
U.S. markets will have their first chance to respond to the bill on Wednesday, after taking a day off for the New Year's holiday. U.S. stocks rose sharply on New Year's Eve as Congress move towards a deal.