Wall St up as Obama, Boehner meet

Wall Street gained as a meeting between US President Barack Obama and House Speaker John Boehner at the White House today bolstered optimism a budget agreement will be reached soon.

Wall Street took heart from the 45-minute gathering about which no further details were released. In afternoon trading in New York, the Dow Jones Industrial Average rose 0.62 per cent, the Standard & Poor's 500 Index gained 1.03 per cent, while the Nasdaq Composite Index advanced 1.01 per cent.

The stakes are high for the budget talks aimed at avoiding US$600 billion of tax increases and spending cuts from taking effect on January 1 - failure to reach an agreement might push the US into recession in the first half of next year.

Indeed, a report today showed that manufacturing in the New York region contracted more than expected in December, underpinning the fragility of the economy that prompted the US Federal Reserve to expand its stimulus program last week.

"It's a historic tug of war: pulling on one side is the fiscal cliff, pulling the other side is continued global monetary easing," David Sowerby, a portfolio manager at Boston- based Loomis Sayles & Co, told Bloomberg News. "The most positive thing for the market is valuation and an accommodative Fed policy."

In Europe, the Stoxx 600 Index finished the session with a 0.1 per cent decline from the previous close.

European Central Bank President Mario Draghi reminded investors of the challenges ahead, even as he predicted a recovery in the second half of 2013 in comments at the European Parliament's Economic and Monetary Affairs Committee.

"We expect economic weakness to extend into next year with a very gradual recovery in the second half of the year," Draghi said. Still, "the medium-term outlook for economic activity remains challenging."

The central bank's new supervisory powers over banks in the region will help restore confidence, Draghi said.

Equity investors in Japan applauded the Liberal Democratic Party's victory as leader Abe Shinzo plans aggressive fiscal and monetary stimulus measures to revive the nation's economy that just tipped into recession. The Nikkei 225 closed with a 0.9 per cent gain.

It's considered bad news for the yen, however, which was last 0.4 per cent weaker against the US dollar. Earlier in the session, the yen dropped as low as 84.48 per dollar, the weakest since April 12, 2011, according to Bloomberg.

The Bank of Japan is scheduled to start a two-day policy meeting on Wednesday.

Switzerland's UBS will pay around US$1.5 billion to settle charges that a group of traders at its Japanese unit rigged Libor interest rates, Reuters reported, citing a source familiar with the matter.

UBS will admit that about 36 of its traders around the globe manipulated yen Libor between 2005 and 2010, according to the source, with a final deal not expected before Wednesday.

Shares of Apple fell initially after Citigroup cut its rating for the stock amid concern about tapering demand for its iPhone 5. The stock rebounded, last up 1.2 per cent.

- BusinessDesk

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