Barack Obama speaking at the White House (Picture: Reuters)

Britain’s biggest companies gained £34billion on Wednesday after the US averted a budget crisis.

A new year deal on the US ‘fiscal cliff’ was widely welcomed by investors – with London’s FTSE 100 Index surging past the 6000 barrier for the first time since July 2011.

Financial markets reacted positively after controversial tax rises and spending cuts were blocked in the US following a last-minute deal helping ease eurozone fears.

Buoyed by the budget deal, the FTSE 100 rose 2.2 per cent in the first day of trading of 2013, with European and Chinese markets also rising strongly.


‘This is great news for global growth and explains why shares and other growth-related assets are up strongly today,’ said AMP strategist Capital Shane Oliver.

Traders hug on the floor of the New York Stock Exchange on 2012’s final day of trading (Picture: Reuters)

The cliff, when $300billion of tax rises and cuts would be automatically triggered to reduce the deficit, was due to come in on January 1.



It was avoided in an unprecedented pre-dawn vote in the House of Representatives which postponed cuts for two months. Crucially for US president Barack Obama, the deal avoided tax increases on the middle classes.

It also increased taxes on workers on more than £247,000 and couples earning £278,000 and over.

But the intense disagreement over the issue was highlighted when Republican house leader John Boehner told the Senate’s top Democrat Harry Reid to ‘go f*** himself’ outside the White House.

Financial experts said the gains could unravel if the US failed to deal with its £10trillion of debt.

‘While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House of Representatives should pass it without delay,’ Mr Obama said on Tuesday.

Brokers appear in a happy mood at Germany’s Stock Exchange in Frankfurt (Picture: EPA)

Cuts totalling $24billion at the Defence Department and elsewhere have also be deferred.

The measures were aimed at reducing national debt but economists warned they might instead raise unemployment and hit consumer spending.

The two parties missed the January 1 deadline for making a deal as they could not agree on how savings should be made.

MORE: Fiscal cliff deal is reason to be cheerful in Britain