World markets react to fiscal cliff

Vice President Joe Biden helped broker the Senate bill. Some House Republicans have been quick to express their dislike for the measure.

HONG KONG (CNNMoney)

The Senate passed a compromise measure Tuesday that would extend the Bush-era tax cuts for the vast majority of Americans and spare tens of millions from the Alternative Minimum Tax.

But the deal, crafted over the long weekend by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, still must be approved by the House. Passage is not ensured, and some House Republicans have been quick to express their dislike for the Senate bill.

All major global markets were closed Tuesday for the New Year's holiday, and the open of markets in Asia and Australia Wednesday will provide the first clues about investor sentiment.

Australia's ASX All Ordinaries index was the first major market to open, adding 0.6% in early trading on hopes that Congress will act. South Korea's KOSPI also opened higher, advancing 0.9%.

The Hang Seng in Hong Kong is scheduled to open later in the morning. Tokyo's Nikkei and the Shanghai Composite will remain closed for holiday celebrations, but will reopen later in the week.

Investors in the U.S. will get their first shot at reaction when markets open in New York. U.S. stock futures were pointing to a higher open.

Exuberance is likely to be muted, however, as it's not clear whether there are enough votes in the House to pass the Senate bill.

Related: Fiscal Cliff: What's in the deal ... what could have been

Even if the Senate bill clears the House, investors could well find the substance of the Senate bill lacking. While the agreement would provide some short-term certainty, it would leave a range of big issues unaddressed.

The bill does not resolve the issue of when and how lawmakers raise the debt ceiling, setting up a major showdown in February.

The legislation also creates a new cliff deadline over spending cuts around the same time the debt ceiling will need to be raised.

And tax and entitlement reform, both are key to long-term deficit reduction, are not included in the compromise proposal.

First Published: January 1, 2013: 8:06 PM ET

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