U.S. Election Aftermath
November 7, 2012
The composition of the U.S. federal government did not change. The Democrats retained control of the White House and Senate, and the Republicans did the same in the House of Representatives.
- Obama captured at least 303 electoral votes, 33 more than needed for victory, by winning most of the battleground states such as Ohio, Colorado, Iowa, Wisconsin, Pennsylvania, Virginia, Nevada, New Hampshire, and Michigan. Florida is still undecided. Romney won North Carolina. Obama got more popular votes than Romney as well.
- The Democrats have 52 confirmed senate seats, with two votes undecided and another two held by independents like Angus King of Maine, who lean toward the Dem side.
- In the House of Representatives, Republicans have taken 44 more confirmed seats than the Democrats, with 17 still to be determined. The House appears even more conservative than before.
The top domestic government priority now is management of the fiscal cliff, which will not be easy given the stalemated shared power between the two major parties. Here’s some conventional beliefs. Not all are supported by the empirical evidence of history.
- Fed policy will continue to be easier (i.e. pro-growth with low interest rates) than had Romney been elected.
- Obamacare and Dodd-Frank banking legislation will be implemented.
- Stopping the trend toward increasing income inequality will be a goal.
- Tax rates will be cut less than had Romney won. Defense spending will rise by less, too.
- The election outcome favors bonds and precious metals but will depress the dollar and share prices.
- China will not be declared a currency manipulator in January.
- The leaders in most U.S. allies such as Britain preferred an Obama victory.
In fact, stocks are mostly higher today. Equities rose 0.8% in Indonesia and Singapore, 0.7% in Hong Kong, Taiwan and Australia, and 0.5% in South Korea and India. Japan’s Nikkei was unchanged overnight, but stocks have gained 0.6% in France, 0.4% in Germany and Spain, and 0.3% in Great Britain.
There’s been little net reaction in the dollar, which slid 0.2% against the yen, loonie, Aussie dollar, kiwi, and yuan and by 0.1% relative to the Swiss franc. The euro is unchanged as market participants look ahead to today’s planned Greek parliamentary vote on austerity and other reforms. Sterling is steady, too.
Ten-year bond yields fell by four basis points in Britain and three bps in Germany. U.S. Treasury yields are indicated lower in the futures.
Oil prices fell by 0.9% to $87.88 per barrel, while gold has risen 0.5% to $1723.80 per ounce.
Another significant storm will hit the New York area today.
Retail sales in the euro area edged down 0.2% in September and were 0.8% lower than a year earlier. Food sales rose 0.8% on month, while other retail sales fell 0.6%. September sales volume was 0.1% lower than the 3Q mean, but sales in 3Q as a whole rose 0.4% from 2Q (1.6% annualized).
German industrial production provided the worst news of the day from a data standpoint, falling by 1.8% on month in September and 1.2% on year. Output was already 1.3% weaker in September than the 3Q mean. Factory output declined 2.3% in September with capital goods slumping 3.5%, while construction went up 2.7%.
Swiss international reserves declined CHF 4.9 billion in October, a sign of lessening upward pressure on the currency.
Swiss consumer prices edged 0.1% higher in October but were 0.2% lower than a year earlier.
Japanese international reserves fell $2.84 billion to $1.274 trillion in October. Such had increased $5.5 billion over the three previous months.
Australia’s construction purchasing managers index rose from 30.9 in September to 35.8 in October, a level that still implies a rather sharp pace of contraction.
Germany’s construction PMI dropped further below the 50 no-change threshold to 44.6 in October versus 48.6 in September and 47.8 in August.
J.P. Morgan’s service-sector PMI for the global economy fell from 53.8 in September to 52.1 in October, signifying a slower rate of expansion. The composite PMI (covering services as well as manufacturing) also points to a slower pace of activity with a reading of 51.3 in October versus 52.4 in September.
Germany wasn’t the only European country to report industrial output. Norwegian industrial production dropped 5.6% in September and was 5.0% lower than in September 2011. Danish industrial production sank 3.3% on month, three times faster than assumed, and was 1.0% lower than a year earlier. Spanish industrial production was 7.0% weaker than a year earlier in September, twice the drop that analysts were generally anticipating.
British shop prices experienced a faster 1.5% on-year pace of growth in October, explained entirely by a 4% increase in food. Other shop prices were unchanged from October 2011.
Business sentiment in South Africa ticked up to 92.0 in October from 91.7 in September.
U.S. mortgage applications slumped 5.0% last week, reflecting the dislocation caused by Hurricane Sandy. 30-year fixed mortgage rates slid 4 basis points to 3.61%. U.S. consumer credit will be reported today. Both German Chancellor Merkel and ECB President Draghi speak publicly. Poland’s central bank announces its latest interest rate decision today; a rate cut is believed quite likely. Tomorrow sees a slew of central bank announcements from the ECB, Bank of England, Central Bank of Peru, Bank Indonesia, and Bank of Korea.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland retail sales, German industrial production, U.S. election results and implications
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