US and Asian equity markets rallied overnight as talk of US politicians reaching a deal to avert the fiscal cliff helped sooth investor worries.
The Dow Jones Industrial Average closed up 208 points at 12,796, with the S&P 500 up 2% at 1,387, amid expectations that US Congress will reach a compromise deal to avert the $600bn in tax rises and spending cuts scheduled to begin in January.
Ratings agency Moody's stripped France of its AAA credit rating after US indices had closed for the day, but Asian equities also posted slight gains. The MSCI Asia-Pacific ex-Japan rose 0.7% to 434.7, though the Nikkei fell 0.1% to 9,143.
The euro dropped against the dollar following the Moody's downgrade, down 0.3% to $1.2777 before paring losses, while futures suggest indices in France, Germany and the UK will open slightly down following a strong start to the week.
The price of a barrel of brent crude rose 3% on Monday on concerns over the escalating conflict in Gaza, but eased back this morning before holding steady at $111 a barrel.
An ambitious objective
'Something completely new'
'Illusion of control'
Reasons to be cheerful
Total investment reaches £9m