BANGKOK -- World stock markets rose Wednesday after U.S. political leaders appeared to be closing in on a budget deal to avert the "fiscal cliff" by the year-end deadline. Economists have been warning the U.S. economy could be thrown back into recession without a deal.
Markets were further boosted by expectations of a positive monthly survey of business optimism for Germany, to be released later in the day.
Britain's FTSE 100 rose 0.3 percent to 5,954.05. Germany's DAX gained 0.2 percent to 7,665.20 and France's CAC-40 added 0.3 percent to 3,659.05. Wall Street was set for a higher opening, with Dow Jones industrial futures gaining 0.1 percent to 13,292 and S&P 500 futures rising marginally to 1,441.70.
The gains follow stock market rallies in Asia.
Japan's Nikkei 225 index surged 2.4 percent to close at 10,160.40, the first time the benchmark has closed above 10,000 since April 3. The stock market advance came three days after a landslide election victory by the Liberal Democratic Party. Former Prime Minister Shinzo Abe, head of the LDP, has pledged to keep the yen from strengthening and take measure to boost the deflation-mired economy.
Australia's S&P/ASX 200 advanced 0.5 percent to 4,617.80, its highest level of the year. Hong Kong's Hang Seng index rose 0.6 percent to 22,623.37. Benchmarks in New Zealand, Taiwan, and Malaysia also rose, while Indonesia fell. Stock markets in South Korea were closed for a public holiday during Wednesday's presidential election.
Stock markets have been on edge for weeks as President Barack Obama and Republican leaders struggle to hammer out an agreement before Jan. 1, when automatic tax hikes and government spending cuts will take effect if no deal is reached.
The two sides appear to be moving closer together, at least on income taxes. On Monday, Obama offered to freeze income tax rates for taxpayers making $400,000 or less and raise them for people making more. Previously, Obama wanted higher taxes for individual income above $200,000, or $250,000 for couples.
Republican House Speaker John Boehner would allow income tax rates to rise for people making more than $1 million per year and would hold rates where they are for everyone making less. The top rate on income exceeding $1 million would go from 35 percent to 39.6 percent. Previously, Boehner opposed allowing any tax rates to go up.
"To be honest, the numbers are irrelevant at the moment and will change numerous times before a final deal is settled on," said Cameron Peacock of IG Markets in Melbourne said in an email commentary. "What is important and what is driving the market higher is that the two parties are now in constructive discussions over specific tax levels and spending programs and working toward a common middle ground."
Investor sentiment also got a boost after the Standard & Poor's rating agency said Tuesday that it had raised Greece's credit grade by six notches to B-, lifting the country out of default. The threat of a Greek default had roiled markets in the first half of this year.
Investors worried that the heavily indebted nation would leave the euro, opening the way for a breakup of the currency block. The ratings firm said the upgrade reflected its view that the other 16 countries using the euro are determined to keep the Greece inside the currency union.
Meanwhile, recent surveys that point to improving factory production and consumer spending in China have also eased concerns that the world's second-largest economy might experience an abrupt downturn, or hard landing.
"A lot of people have called for a hard landing. They've been proved very wrong," said Chris Weston of IG Markets. "I think the market has become a lot more celebratory about the kind of growth from China."
Japanese export-sensitive shares soared amid a weakening yen, which raises the value of expatriated profits. Mitsubishi Motor Corp. gained 3.4 percent. Canon Inc. surged 6.5 percent.
Australia's Whitehaven Coal Ltd. soared 8.1 percent after the company said it had held talks with China's largest coal company, Shenhua Group, although no offers were currently on the table.
Benchmark oil for January delivery rose 6 cents to $88.46 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 73 cents Tuesday to finish at $87.93 per barrel on the Nymex.
In currencies, the euro rose to $1.3252 from $1.3220 late Tuesday in New York. The dollar rose to 84.31 yen from 84.20 yen.