Asia stocks rise over US budget deal optimism

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By PAMELA SAMPSON, Associated Press

BANGKOK (AP) — Asian stock markets rose Wednesday after U.S. political leaders appeared to be closing in on a budget deal to avert the "fiscal cliff" by the year-end deadline. Economists have been warning the U.S. economy could be thrown back into recession without a deal.

Japan's Nikkei 225 index jumped 1.1 percent to 10,034.45. Hong Kong's Hang Seng index rose 0.7 percent to 22,640.25. Australia's S&P/ASX 200 advanced 0.3 percent to 4,608.90. Benchmarks in New Zealand, Taiwan, and Malaysia also rose, while those in Singapore and mainland China fell. Stock markets in South Korea were closed for a public holiday during Wednesday's presidential election.

Stock markets have been on edge for weeks as President Barack Obama and Republican leaders struggle to hammer out an agreement before Jan. 1, when automatic tax hikes and government spending cuts will take effect if no deal is reached.

The two sides appear to be moving closer together, on income taxes at least.

On Monday, Obama offered to freeze income tax rates for taxpayers making $400,000 or less and raise them for people making more. Previously, Obama wanted higher taxes for individual income above $200,000, or $250,000 for couples.

Republican House Speaker John Boehner would allow income tax rates to rise for people making more than $1 million per year and would hold rates where they are for everyone making less. The top rate on income exceeding $1 million would go from 35 percent to 39.6 percent. Previously, Boehner opposed allowing any tax rates to go up.

"To be honest, the numbers are irrelevant at the moment and will change numerous times before a final deal is settled on," said Cameron Peacock of IG Markets in Melbourne said in an email commentary. "What is important and what is driving the market higher is that the two parties are now in constructive discussions over specific tax levels and spending programs and working toward a common middle ground."

Investor sentiment also got a boost after the Standard & Poor's rating agency said Tuesday that it had raised Greece's credit grade by six notches to B-, lifting the country out of default. The threat of a Greek default had roiled markets in the first half of this year.

Investors worried that the heavily indebted nation would leave the euro, opening the way for a break-up of the currency block. The ratings firm said the upgrade reflected its view that the other 16 countries using the euro are determined to keep the Greece inside the currency union.

In Japan, the focus remains on the weekend landslide election victory of the Liberal Democratic Party, whose leader, Shinzo Abe, in line to become prime minister, wants to shore up growth with higher public works spending. That was despite concern about the consequences of adding to Japan's towering public debts and doubts about the effectiveness of looser policy.

Benchmark oil for January delivery rose 2 cents to $88.42 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 73 cents Tuesday to finish at $87.93 on the Nymex.

In currencies, the euro rose to $1.3226 from $1.3220 late Tuesday in New York. The dollar rose to 84.36 yen from 84.20 yen.

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