U.S. budget deal talk lifts shares and commodities

Thu Nov 29, 2012 8:49am EST
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By Richard Hubbard

LONDON (Reuters) - World equities hit a three-week high and commodities gained on Thursday as optimism grew that U.S. political leaders would eventually reach a deal to avoid a fiscal crisis which threatens to derail growth in the world's biggest economy.

U.S. stock index futures also pointed to further gains helped by data showing the economy grew faster than initially thought in the third quarter. <.

The "fiscal cliff" - automatic spending cuts and tax increases early in 2013 unless Congress agrees an alternative - is the biggest risk facing global markets in the final weeks of the year after a deal to help Greece was done earlier this week.

"We are moving towards a phase of gradual improvement thanks to the likely resolution of the 'fiscal cliff' issue in the U.S., a bottoming out of the Chinese economy and the stabilization of the euro zone," said Giordano Lombardo, chief investment officer at Pioneer Investments.

Good demand at an Italian bond sale, where yields fell to their lowest level in two years, added to signs that the euro zone crisis had begun to ease.

The growing optimism spread across world share markets, sending the MSCI global equities index .MIWD00000PUS up 0.6 percent to 330.74 points, its highest level since November 7.

In Europe the FTSE Eurofirst 300 index .FTEU3 rose 0.8 percent with gains of between 0.7 and 1.0 percent posted by London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI.

However, traders said that share markets were likely to remain nervous until a deal was done in Washington.   Continued...

People are reflected on an electronic board displaying a graph showing the movement of Nikkei share average outside a brokerage in Tokyo November 7, 2012. REUTERS/Toru Hanai