Here's my summary of the key news overnight with an important election change in America.
US mid-term elections have been tough on incumbents with some dramatic switching away from the Democrat Party. Both houses of Congress will now have Republican majorities, with the Senate back in the red corner. The final two years of Obama's term will be a tough one for him. Having said that, the winners on the Republican side are tending to be the more 'moderate' candidates. Despite that, the message is clearly anti-Democrat.
Unease in these results outside the US is not reflected there. Markets are pricing risk the same way as before.
One consequence for New Zealand out of this change is that President Obama may now be able to make necessary compromises to get the TPP deal through Congress.
This Saturday we get the latest US non-farm payrolls report which is major market data. Today we got the pre-cursor ADP payrolls report and that was better than observers were expecting. It showed payrolls expanded above +200,000 for the seventh month out of the last six. This is a good sign for Saturday and it buoyed markets.
The Dow and the S&P500 are both at or near all-time records.
Earlier this morning, the Federal Reserve unveiled a final rule on Wednesday designed to prevent large financial firms from becoming so big that their failure could shake the core of the financial markets.
No one institution can be bigger than 10% of the total US financial system. (If that rule was in place in New Zealand, our four biggest banks would need to be dismantled.)
Meanwhile, services industry activity slowed in the US for a second straight month in October, suggesting some loss of momentum in their economy early in the fourth quarter, although it is coming off a very strong level.
And here's an eye-watering factoid: investors pulled US$48 billion from PIMCO’s mutual funds in October following the departure of star manager Bill Gross, the fund research firm Morningstar said earlier today.
In Australia, a major analyst has issued a stern warning. Australia could face its first recession in almost 25 years unless authorities further stimulate the economy, Morgan Stanley said. Growth there will slow to under 2% and unemployment could reach 7% they said. The iron ore price has fallen further in the past week.
And China has announced that it
In New York, UST 10yr bond yields were again flat in trade today and are currently at 2.36%.
The oil price has stayed firmly at its new lower levels and is now over US$78/barrel with the Brent price just over US$83/barrel.
The gold price however took a further tumble and is now below US$1,149/oz.
Following on from the surging US dollar, we lost all of yesterday's gains in the kiwi dollar. It is now at 77.2 USc, at 89.9 AUc, and the TWI is at 76.5.
If you want to catch up with all the changes yesterday we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
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4 Comments
TPPA, however what's in it for Obama? ie what will he have to give up on? Its looking likely that Congress will spend the next 2 years trying to repeal the ACA, stop the EPA and "put the black man in his place" even maybe impeach him. Ergo I think the TPPA and anything else is dead. Congress wont do a thing that improves Obama's last 2 years or the chances of H. Clinton (assumption here) to win in 2016 quite the opposite IMHO.
Not so sure on moderate either, the GOP leadership is the same.
regards
Steven you are right - all political efforts will be directed internally. The outcome of this election reflected massive US voter dissatisfaction, witness comments from Bloomberg.
Republicans seized on voter anger over President Barack Obama’s handling of the economy to take control of the U.S. Senate, setting up a clash of priorities that will shape his final two years in office and the race to succeed him.
The economy was voters’ most pressing concern as they cast their ballots in the midterm election, with seven of 10 rating conditions poor, preliminary exit polls showed.
More than five years after the recession ended, ordinary Americans still feel pinched. Wages and incomes have been stagnant even as the unemployment rate has dropped to 5.9 percent from 7.8 percent when Obama was re-elected in 2012. Corporate profits have also set records, stocks have risen to new highs and the nation’s output of goods and services grew more than $1 trillion from its pre-recession peak. Read more
In a word, jobs. The strange thing is of course the GOP led congress has done more to stop the creation of jobs and to stop the economy recovering than they get credit for, instead Obama seems to get the blame. Democrats on top of that seem to have had no "balls", utterly afraid to stand up for anything that might cost votes, ceding the advantage to the extremist Republicans.
2016 will be an interesting Presidential election, (I hope Hillary stands, not that I see her as ideal) at least in watching how the US voter votes.
Shooting themselves in the foot springs to mind.
regards
So the Aussie economy needs steroids or at least a stimulant ............ this may sound terrible , but we got our economic stimulus compliments of mother nature in the form of the Christchurch earthquakes.
The entire place has got to be the worlds biggest single construction site right now ,its quite staggering whats going on there .
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