Markets Upbeat After Obama Victory

So Barack Hussein Obama, a man denied a floor pass to the Democratic convention eight years ago, makes it to the top of Martin Luther King’s metaphorical mountain 30 years on. I believe his chums call him Barry. Hopefully he will be more McGuigan than Manilow.

And what of the markets. Well we had our biggest Election Day rally in stocks since 1984, led by energy and materials sectors. There are also some tentative signs of risk appetite returning, with the rally in AUD / JPY a good indicator.

Today’s Market Moving Stories

• The ECB’s chief economist, and a resident hawk, Jurgen Stark warmed us up further for the rate cut that’s coming Thursday by saying that the Council “was ready to use all instruments at their disposal” and that “the inflation environment had changed radically.” Meanwhile another retired monetarist and dissenter to past cuts, the US Fed’s Fisher spoke of “inflationary momentum” being “frozen by the financial crisis.” Seems the penny has finally dropped. How long before we are talking about the dangers of deflation. If inflation is influenza in medical speak, then deflation is pneumonia.
• The ad hoc rollout of Eurozone bailout packages seem set to continue with talk of an Italian job worth €20bn in capital injections.
• The Irish government had to pay a whole 1% over what Germany can issue for their new 3 year bond!
• Former celebrity UK economist Roger Bootle said that the BoE (MPC) may need to cut rates to 0%.
• Daimler’s CEO criticized commercial banks for hoarding cash and contributing to the breakdown in car markets.
• The deleveraging in banking that I’ve been harking back to time and time again continues. Star pupil J P Morgan (JPM) is closing its global proprietary trading desk and 11 German real estate funds (with €34bn in assets) have frozen redemptions.

So Where Are We Now?
In sum the markets are now moving away from pricing in financial Armageddon to trying to fumble in the dark and gauge just how deep and long the global recession will be. Sure there has been a thaw. Nicely captured here but I’m afraid it will be a while before Mamma Cass gets to sing.

Who Will Be the Next US Treasury Secretary?
Being US Treasury Secretary used to be something of a breeze (who even remembers Paul O’Neill or John Snow?). You traveled the world staying in 5 star hotels giving speeches full of platitudes and talking of a strong dollar policy with your fingers crossed behind your back.

But now, the job description has changed. Obama will want a steady pair of hands to steer the markets through this storm. All manner of names from the legendary inflation fighter Paul Volcker to the charismatic Warren Buffett have been aired as possible candidates. My 5 euro would be one Timothy Geithner, the current President of the New York Fed. Hardly a household name but a safe pair of market friendly hands methinks.

Equities

• Irish banks are back under pressure this morning on the back of AIB’s (AIB) trading statement. It wasn’t pretty and yet still appears to overly optimistic going forward. The madness of that increase in their dividend is now clear for all to see. And AIB are by far the strongest of the Emerald Isle’s institutions.
• France’s BNP (BNPQY.PK) missed with results this morning.
• It’s worth noting the strong performance of GE (GE), Principal Financial (PFG) and CIT (CIT) yesterday. They were all strong on speculation that the government will expand their rescue programs beyond banks.

Data Today
As an appetizer for Friday’s US non farm payrolls, we get the ADP employment report today at 13.15 (-100k). Note my usual caveat emptor about this ADP jobs report and reading too much into it as it has consistently under-estimated job losses as measured by the official non farm payroll report due Friday.

Services ISM (47.0) is out at 15.00. Recall the manufacturing ISM number fell off a cliff the other day.

Disclosures: None

Comments

[James Wilson:]

Let Joe the plumber buy into this suckers run I will set it out.

2008 Nov 05 09:12 AM

[Connect-a-d...:]

Upbeat markets... I guess that explains the cheerful red color on my screens this morning.

2008 Nov 05 09:52 AM

[SteveTheHawk:]

Upbeat?? I'm not seeing it. Where? I think we may have already slipped past Obam-aphoria and are back to the reality of a very nasty global economy. Then again, it could just be the initial burst of selling by Republican investors who are convinced the world has ended.

2008 Nov 05 10:10 AM

[wsd:]

Higher taxes and government directed investment, means that sooner or later the private economy will whither. With fewer dolars available for investment future economic growth will go only to those sectors the government "prefers". Government energy policy will be contructed around a political philosphy, rather then economic or scientific basis. Expectations will raise hope but in the end illogical energy policy will substantially lower economic growth and give us high energy costs that are not necessary.

Investment: Move to companies that have dynamic international advantage embedded in their operations, strong balance sheets, good dividend growth prospects

2008 Nov 05 12:33 PM

[James Wilson:]

CIT is not even on the list from the Fed. LOL.

2008 Nov 05 01:26 PM

[formerhawk:]

If this is upbeat we are going to really hate seeing downbeat. Your bio says up to the minute news for traders, one has to ask do you take your own advice?

2008 Nov 06 08:27 AM

[petyaczar:]

Earth to MOle,, Earth to Mole,,,,

Market down almost 500 yesterday.... WHAT ARE YOU SMOKIN??

Time to up the meds and/or turn the computer back over to mommy.

ROFLMAO

2008 Nov 06 09:56 AM

[NOWHEREMAN:]

Nothing has changed, the recession is evolving.

Back into the hole Mole, whack a mole.

2008 Nov 06 10:41 AM

[jjc7477:]

Hey look! The market is even more "upbeat" today! At this pace we can cheer the market all the way to ZERO!!!

Thanks Mole! You sure know your stuff!!!!!

2008 Nov 06 11:34 AM