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Markets up after 11th hour fiscal cliff deal

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Asian markets received a New Year's boost as the US House of Representatives passed a last minute deal to prevent the US falling over the fiscal cliff.

The financial compromise Bill was passed 257 – 167 after a late night session in the House of Representatives.

President Barack Obama hailed the deal to stave off a “fiscal cliff” of drastic taxation and spending measures as “just one step in the broader effort to strengthen the economy”.

“I will sign a law that raises taxes on the wealthiest 2% of Americans… while preventing a middle-class tax hike,” Obama said.

Despite the last minute agreement, analysts warned many budget issues remain unresolved before another fiscal deadline in around two months including the need to raise the federal borrowing limit.

However, news a deal had been reached provided a New Year’s boost for markets. Hong Kong’s Hang Seng index gained 2.1%, while South Korea’s Kospi added 1.7% and Australia’s ASX 200 rose 1.2%.

Uncertainty over whether the US government could reach a deal to avert the fiscal cliff had weighed on markets at the end of 2012, with the FTSE 100 down 0.47% on the last day of the year.

However, the Dow Jones rose 1.28% on the last trading day of 2012 as hopes grew some kind of deal could be signed.

Despite a subdued end to 2012, the FTSE 100 still finished the year up 6%, compared to a fall of 5.6% in 2011.

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