Posts from Wednesday Nov 7 2012

The Closer


The Dow lost 312 points, its biggest drop this year, while the S&P 500 fell its hardest since June. It declined 2.4 per cent to close at 1,394.59. Banks and healthcare and energy companies, industries where Mitt Romney had promised to revise Obama-era reforms, bore the brunt of the post-election sell-off (Reuters). Investor appetite was also blunted by fears over whether the largely unchanged balance of control in House, Senate and White House will mean a solution to the fiscal cliff is left to the last minute. There were also signs of trouble in Europe: ECB President Mario Draghi warned that the eurozone crisis was beginning to hurt Germany’s economy (Bloomberg). Read more

Romney’s gone, but his best idea can still help with the fiscal cliff

Rather late in his forlorn campaign, Mitt Romney introduced a tax policy idea that had bipartisan appeal: to cap the amount in itemised deductions that American tax filers can use.

The problem was that Romney was suggesting it as a way to help make his proposal to lower tax rates pay for itself, ie to be ‘revenue-neutral’ in the jargon. But there was no way to do that just by lowering deductions: the tax cuts were too big, and Romney never really explained just how he would offset them. Read more

Dark clouds of certainty, or something

Well we’re no longer off 300 points on the Dow. (Off 265, as we went to pixels.) But what went on here?

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US Markets Live: Wednesday, 7th November 2012

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US Markets Live! And thanking God the election’s over

Sell-off after the US open at pixel time…

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Bungee cord at the ready, will US politicians jump?

Democrats have a track record of getting fiscal legislation through a Republican-led House by cutting deals. Will they be able to pull off the same trick when it comes to averting a slew of budget cuts and tax increases that will otherwise kick in at the end of the year?

Macro-strategist Michael Hampden-Turner has some thoughts on this — the $600bn “fiscal cliff” — which he shared with us on Wednesday morning (video below). Read more

Culled UBS traders replaced with algos

It’s bad enough finding out that you’ve been made redundant when your pass fails to let you in to the building. But finding out that you’ve been sacked and replaced by a computer (which has more or less made your skills redundant)? That’s even worse.

So spare a thought for David Gallers, former head of CDS index trading at UBS, who was let go last week, to be replaced by snazzy new algo. Read more

Markets Live: Wednesday, 7th November, 2012

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The (early) Lunch Wrap

Barack Obama sweeps to victory || BHP Billiton hunts for new chief || Goldman partners pocket $22m || Peltz goes to France || Former M&S chair takes aim at Bolland’s performance || AOL surges on robust results || BNP Paribas profits rise sharply || European Union regulators are to end an antitrust probe into e-book prices || Greek austerity votes nears || Barclays poised to sell ‘cocos’ abroad || Markets data Read more

Brussels’ fiscal management ‘is not yet up to standard’

There was good news for eurosceptics on Tuesday, as the European Court of Auditors (ECA) published its report into last year’s EU budget. The audit is already being used as yet another reason to push for a real-terms cut in the EU’s future budgets later this month.

The ECA is charged with assessing how Brussels spends its money, and its report for 2011 showed, once again, that the EU’s financial management leaves something to be desired. It found that a host of payments to EU-funded projects were affected by “material error”, with an estimated error rate of 3.9 per cent for the EU budget as a whole. Read more

Hey, Japanese government – leave the BoJ alone (says Koo)

The Bank of Japan’s unprecedented joint statement with the Japanese government after the central bank’s October meeting raised eyebrows around the world. The BoJ was already widely seen as having come under increased political pressure in recent months as the country’s economy had slowed; so what did the joint statement mean?

The statement contained a couple of key declarations: “The Bank strongly expects the Government to vigorously promote measures for strengthening Japan’s growth potential”, and “The Government strongly expects the Bank to continue powerful easing as outlined in section 2 until deflation is overcome.” Read more

Oh, for a Greek version of Nate Silver

From Gary Jenkins at Swordfish Research:

Strange to think that over 100 million votes cast in the US may have less impact upon the markets over the next month or so than some 300 votes due to be cast in the Greek parliament this evening.

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Further reading

Elsewhere on Wednesday,

– Nate Silver and the lessons of 2012.

– Romney’s loss, and what now for the Republicans?

– Obama’s victory, in GuamRead more

The 6am Cut London

Obama wins | Democrats to hold Senate; Republicans retain House | Dollar weakens on election news | Asian markets slightly higher | BHP looking for new CEO | EU regulators nearing deal on ebook pricing | Greek austerity vote tonight | El-Erian on the election result Read more

Obama wins

The major news outlets have called the election for Barack Obama, though the president himself didn’t wait for all of them:

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US election night

Just a few resources for our readers staying up to watch tonight’s activity…

— A chart from RBC Capital (data from RealClearPolitics, CBS, and RBCCM US Market Economics) showing what time the polls close for the toss-up states: Read more