BANGKOK (AP) -- Stock markets in Asia registered relief Wednesday as U.S. lawmakers edged toward a deal to stop hundreds of billions of dollars in automatic tax increases and spending cuts from taking effect that could throw the world's biggest economy off a so-called fiscal cliff.
Benchmarks in Australia and Hong Kong boomeranged on the first trading day of the year after the Democratic-led U.S. Senate passed an emergency measure to avert much of the impact of the tax-and-spending changes.
Traders were keeping a close eye on the Republican-controlled House, which was to vote on the legislation at 11 p.m. EST Tuesday.
Economists have warned that without action by Congress, the tax increases and spending cuts that technically took effect at the start of the year could cause a recession. Some experts had predicted financial markets would plunge unless a clear-cut deal was reached before the deadline.
That didn't happen in Asia, where markets took what they could get — a stopgap measure to retroactively counter some of the 'fiscal cliff' effects that could harm the economy. Hong Kong's Hang Seng index rallied 1.7 percent to 23,043.30. Australia's S&P/ASX 200 surged 1.2 percent to 4,705.80. South Korea's Kospi jumped 1.2 percent to 2,021.04.
Some analysts said that expectations for a compromise were so low that any deal was viewed as positive.
"Among business leaders, I'm gonna say this deal isn't enough to move the needle on confidence. It may improve consumer confidence a little, investors obviously are celebrating a tentative deal but you know how transitory investor confidence can become," said Jack Ablin, chief investment officer at BMO Group.
Benchmarks in Singapore, Taiwan, the Philippines and Indonesia also rose. Markets in Japan are still on holiday and reopen Friday.
Uncertainty about the outcome of negotiations drove down Asian-Pacific stocks Monday, the last trading day of the year.
Australia's S&P/ASX 200 fell 0.5 percent to close at 4,648.90, as investors sold off stocks to lock in profits. Hong Kong's Hang Seng closed marginally lower. Singapore, New Zealand and India also declined. Other benchmarks, including those in Japan and South Korea, were closed for the holiday.
The legislation calls for higher taxes on incomes over $400,000 for individuals and $450,000 for couples. Taxes also would rise on estates greater than $5 million in size and on capital gains and dividend income made by the wealthy.
At the same time, it would stop $24 billion in spending cuts set to take effect over the next two months, although only about half of that total would be offset with spending reductions elsewhere in the budget.
Even if Washington bypasses the fiscal cliff, the next crisis is just around the corner, in late February or early March, when the government reaches a $16.4 trillion ceiling on the amount of money it can borrow.
Republicans say they won't go along with raising the limit on government borrowing unless the increase is matched by spending cuts to help attack the long-term debt problem. Failing to raise the debt ceiling could lead to a first-ever U.S. default that would roil the financial markets and shake worldwide confidence in the United States.
"Call it breathing room, call it kicking the can down the road, call it whatever you like ... when the decision on the legal US debt limit will be needed, the fight starts afresh," said analysts at DBS Bank Ltd. in Singapore.
"Republicans vow not to raise the limit without sharp cuts in spending and Obama vows not to cut spending without further tax hikes. Two more months of shenanigans ... It certainly looks that way."
U.S. stocks shot higher Monday on the belief that lawmakers would work out a deal. The Dow Jones industrial average rose 1.3 percent to 13,104.14. The Standard & Poor's 500 rose 1.7 percent to 1,426.19. The Nasdaq composite index rose 2 percent to 3,019.51.
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