BANGKOK (AP) -- World stock markets rose Wednesday as investors became increasingly convinced that U.S. political leaders will reach a budget deal that avoids a major hit to the world's No. 1 economy. Chinese shares soared on hopes for more stimulus measures.
Negotiations between the White House and the U.S. Congress have been revving up in recent days in order to reach a deal aimed at averting the so-called fiscal cliff, which is a series of sharp government spending cuts and tax increases that begin to kick in Jan. 1 and could cause a recession.
Britain's FTSE 100 rose 0.5 percent to 5,897.87. Germany's DAX added 0.4 percent to 7,466.96. France's CAC-40 gained 0.5 percent to 3,599.81. Wall Street futures signaled a session of gains. Dow Jones industrial futures rose 0.4 percent to 12,983 while S&P 500 futures rose 0.4 percent to 1,411.10.
Despite political posturing and a deep divide on critical issues, most analysts think a deal acceptable to both President Barack Obama and congressional Republicans will be cobbled together before the end of the year.
Analysts at DBS Bank Ltd. said that "the US fiscal cliff is viewed as political theatre and not as an imminent threat to the US economy."
"Unlike 2010, both the White House and the Republicans have been careful in communicating that, despite the differences in opinions over how to rein in the fiscal deficit, the door is open for a compromise solution by the end of the year."
Mainland Chinese shares soared a day after the government pledged to maintain policies intended to strengthen the economy and also expressed a willingness to "fine tune" them and make them more effective.
The Shanghai Composite Index jumped 2.9 percent to 2,031.91 while the smaller Shenzhen Composite Index soared 3.8 percent to 771.72. Infrastructure-related shares posted strong gains. Fujian Cement surged 10 percent. Xinjiang Bayi Iron & Steel jumped 4.1 percent.
Chinese leaders have cut interest rates twice since early June and are pumping money into the economy through higher spending by state companies and on building airports and other public works.
"Investors expect the economic outlook to be improving based on recent economic data," said Zhang Yang, an analyst at Sinolink Securities in Shanghai.
Japan's Nikkei 225 index rose 0.4 percent to 9,468.84, its highest close since April 27. Hong Kong's Hang Seng jumped 2.2 percent to 22,270.91. South Korea's Kospi added 0.6 percent to 1,947.04. Australia's S&P/ASX 200 gained 0.4 percent to 4,520.40.
Investors are also focused on U.S. economic data due for release later in the week. On Friday, U.S. nonfarm payrolls, which are a key gauge of employment, will be released for November. The figures could be distorted by the impact of Superstorm Sandy, which battered much of the eastern seaboard.
There's already evidence the storm had an impact on the U.S. economy. Monday's monthly manufacturing survey from the Institute for Supply Management was far weaker than anticipated.
Benchmark oil for January delivery was up 42 cents to $88.92 per barrel in electronic trading in the New York Mercantile Exchange. The contract fell 59 cents to close at $88.50 per barrel on the Nymex on Tuesday.
In currencies, the euro rose to $1.3112 from $1.3101 late Tuesday in New York. The dollar rose to 82.20 yen from 81.84 yen.
AP researcher Fu Ting contributed from Shanghai.