Cliff Averted
Risk appetite was supported overnight after both the US Senate and the US House of Representatives approved a Bill designed to avert the full force of the US fiscal cliff. Tax hikes will still happen, but these will be diluted. Unemployment benefits are to be extended until end-2013. Planned spending cuts (which were due to take effect in January) will be postponed for two months. It sets up another showdown within weeks which has the potential to be even more disruptive (given the US debt ceiling must be raised at the same time if technical default is to be avoided). But for now the conditions seem right for a moderate celebratory rally in risk assets (however brief), and we would be reluctant to fight this just yet.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank