FTSE rallies but cliff face still worries Wall St

THE stock market rally continued yesterday with traders eyeing a push through the 6,000 mark for the FTSE 100 if a deal to avert a “fiscal cliff” in the US can be agreed in the next few days.

Britain’s benchmark share index closed up 25.69 points at 5,961.59 as the so-called “Santa rally” took hold, with sentiment also helped by the European Central Bank (ECB) opening the path to cheaper funding for struggling Greek banks and a Greek credit upgrade from Standard & Poor’s.

However, stocks across the Atlantic struggled to gain traction amid fears of a last-minute stand-off between Democrats and Republicans. The fiscal cliff would see steep tax hikes and spending cuts come into effect in the new year.

Craig Erlam, market analyst at Alpari UK, said: “Investors in the US appear to be reacting to comments made by President Obama’s aid who claimed he would reject any ‘plan B’ offered by the Republicans. This is a concern to anyone relying on a deal being done by the end of the year.

“These negotiations are starting to become a bit of a rollercoaster ride.”

Scott Eldridge at Caprin Asset Management in Virginia said: “It seems like all the parties have made progress, but it continues to drown out all the other noise in markets.”

The ECB re-opened the path to cheap financing for Greek banks, allowing the country’s sovereign debt to be used as collateral in ECB funding operations.