The US averted economic calamity late on Tuesday when lawmakers approved a deal to prevent huge tax hikes and spending cuts that would have pushed the world’s largest economy into recession. Financial markets have been rattled by the months of budget brinkmanship. The crisis ended when dozens of Republicans in the House of Representatives buckled and backed tax hikes approved by the Democratic-controlled Senate.

The vote averted immediate pain like tax hikes for almost all US households, but did nothing to resolve other political showdowns on the budget that loom in coming months. Spending cuts of $109 billion in military and domestic programmes were only delayed for two months.

Asian stocks hit a five-month high and the dollar fell as markets welcomed the news. European markets followed their Asian counterparts and rallied on the news  while futures markets pointed to Wall Street doing the same.