By By Margreet Dietz
Nov. 5 (BusinessDesk) – All eyes are on the US
presidential elections on Tuesday and investors may prove
hesitant to make fresh bets until the results are
in.
One of the latest polls showed that President
Barack Obama is slightly ahead of Mitt Romney in Ohio and
Florida, viewed by many strategists as the two most
important swing states. The NBC News/Wall Street
Journal/Marist College survey of likely voters put Obama
ahead of Romney in Ohio, 51 percent to 45 percent, and in
Florida, 49 percent to 47 percent, according to Bloomberg
News.
Obama appears to be receiving a lift from his
managing of the crisis in the wake of Hurricane Sandy as
well as encouraging economic signs.
"The market might
like the fact of an Obama win since it would mean less
uncertainty," Ryan Detrick, senior technical strategist at
Schaeffer's Investment Research, in Cincinnati, told
Reuters.
Trading on Wall Street was limited to three
days last week—stock markets were closed on Monday and
Tuesday—as Hurricane Sandy caused an estimated US$50
billion of damage to the East Coast of the US. New York City
in particular was hit hard with transportation and the power
grid suffering significant damage. In addition, almost half
of the people killed as a result of the superstorm died in
the New York City area.
Amid low volume and a focus on
the storm, markets were mostly muted the final three days of
last week: the Standard & Poor's 500 Index gained 0.2
percent; the Dow Jones Industrial Average fell 0.1 percent;
and the Nasdaq Composite Index shed 0.2 percent.
There
were notable and individual exceptions among companies
including Starbucks which lifted its profit forecast for the
fiscal year and whose shares surged 9 percent on
Friday.
The latest clues on the state of the world's
largest economy will come in the form of the ISM
Non-Manufacturing Index and reports on international trade
and weekly jobless claims in the days ahead.
Last
week, data provided much-needed relief with
better-than-expected numbers on consumer confidence and
manufacturing. Most importantly October's jobs
report—released on Friday—was stronger than anticipated
and bolstered hope that progress is being made after all in
the struggling labour market. US employers added 171,000
jobs in October and more people resumed looking for work,
which pushed the jobless rate slightly higher to 7.9
percent.
The US Treasury is scheduled to sell US$72
billion in notes and bonds this week, according to
Bloomberg. The appetite for US government debt remains
strong as the economic impact of Sandy raised fresh concerns
about the recovery. A Reuters poll of economists predicted
that Sandy will knock 0.2 percentage points off of
fourth-quarter gross domestic product.
US bonds also
are being lifted by the lingering EU crisis. Europe's feeble
finances may take five years or more to resolve, German
Chancellor Angela Merkel told some of her own party
officials on Saturday.
Looking beyond the elections,
the outlook for US corporate earnings continues to weigh on
Wall Street. Of the 378 companies in the S&P 500 that have
reported earnings so far, 61.9 percent have exceeded
forecasts, in line with the 62 percent quarterly average
since 1994, according to Thomson Reuters data through
Friday.
However, just 38.2 percent of companies having
reported better-than-expected revenue, compared with the 62
percent quarterly average since 2002 and the 55 percent
average over the past four quarters.
Companies set to
report this week include Groupon, Time Warner Cable and News
Corp.
In Europe, the Stoxx 600 Index increased 1.6
percent last week lifted by some strong results from a range
of companies including Deutsche Bank as well as a plan by
UBS to slash 10,000 jobs as it refocuses its
business.
Not to be forgotten, policy makers at the
European Central Bank and the Bank of England meet later
this week. BOE officials will decide whether to extend the
bank's asset-purchase program after the UK economy grew in
the third quarter.
The nine-member Monetary Policy
Committee will probably leave the target for asset purchases
at 375 billion pounds (US$602 billion), according to 35 of
45 economists in a Bloomberg News survey. Seven forecast a
50 billion-pound increase in quantitative easing, and three
expect a 25 billion-pound expansion.
The latest data
on China—with reports on retail sales, industrial
production, and the consumer price index due this
week—will also be closely watched for further clues that
the slowdown in the pace of expansion of the world's
second-largest economy is less than initially feared.
A report on the weekend showed that China's
non-manufacturing sector rebounded in October. The timing is
good as it comes days ahead of the once-in-a-decade
leadership change at the top of the Communist Party set for
November
8.
(BusinessDesk)
