Obama victory sparks profit-taking in US, EuropeA global stock rally faltered and Wall Street fell hard Wednesday as investors buckled down for a gloomy economic ride after the euphoria of Democrat Barack Obama's US presidential election victory.
Dealers said gains made Tuesday on hopes for fresh efforts to tackle the global financial crisis were surrendered quickly on Wall Street and in Europe although Asia did better despite signs of gathering economic problems.
In New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , the Dow Jones Industrial Average Dow Jones Industrial Average
The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. plummeted 486.01 points (5.05 percent) to close at 9,139.27.
The tech-heavy Nasdaq slumped 5.53 percent to 1,681.68 and the Standard & Poor's 500 index slid 5.27 percent to 952.77.
The market action wiped out massive gains from the strongest Election Day rally in history Tuesday as investors hoped that a new president would bring relief from the global financial crisis. The Dow had surged 3.28 percent and the Nasdaq added 3.12 percent.
Michael Townsend at Charles Schwab Charles Schwab can refer to:
"In 10 weeks, Barack Obama will assume the presidency. But the newly elected leaders will be facing a perfect storm of bad news: an economy in recession, a financial crisis that has spawned an ever-expanding role for government in our financial system, wars in two countries, and a budget deficit of staggering proportions," he said.
"The feel-good factor which may have been generated ... from the historic nature of Obama's victory is unlikely to filter through to financial markets," said Martin Slaney, head of derivatives at financial spread betting group GFT GFT Global Forex Trading (Global Futures & Forex, Ltd.)
GFT Glasgow Film Theatre (Glasgow, Scotland)
GFT Geographic Full-Time
GFT General Flight Test (pilot licensing) in London.
"Given the much bigger economic picture there is little chance of a post-election rally," Slaney said.
In Europe, London's FTSE 100 index FTSE 100 Index
A market-weighted index of the 100 leading companies traded in Great Britain on the London Stock Exchange. The Financial Times of leading shares shed 2.34 percent at 4,530.73. In Paris, the CAC 40 index CAC 40 index
A broad-based index of common stocks composed of 40 of the 100 largest companies listed on the forward segment of the official list of the Paris Bourse. fell 1.98 percent to 3,618.11 and in Frankfurt, the DAX lost 2.11 percent to 5,166.87.
World leaders hailed Obama's historic triumph but there were also calls for the global superpower to change the way it does business.
European Commission president Jose Manuel Barroso called for the election to usher in a "new deal" between the United States and the rest of the world to tackle the global financial crisis and other troubles.
"Back to the realities of financial world and it seems that the euphoria didn't last that long with stock markets around the globe peering into what they increasingly believe will be a long and protracted pro·tract
tr.v. pro·tract·ed, pro·tract·ing, pro·tracts
1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations.
2. period of global recession," said Howard Wheeldon, senior strategist at BGC BGC General Cable Corporation (stock symbol)
BGC Billy Graham Center
BGC Baptist General Conference (formerly Swedish Baptist Denomination)
BGC Boys & Girls Club
BGC Bubblegum Crisis Partners.
Up to Obama's inauguration on January 20, "there is unlikely to be much if any positive economic news ... despite (government efforts) ... there is unlikely to be much good news around to provide cheer for quite a while," Wheeldon said.
After the strong technical bounce of the past few days, "we now move into a period when markets are likely to do little more than move sideways with the odd upward and downward blip," he said.
Dealers noted that investors across Europe were anticipating further cuts to interest rates on Thursday by both the Bank of England Bank of England, central bank and note-issuing institution of Great Britain. Popularly known as the Old Lady of Threadneedle Street, its main office stands on the street of that name in London. and the European Central Bank European Central Bank (ECB)
Bank created to monitor the monetary policy of the countries that have converted to the Euro from their local currencies. The original 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, to give the economy another boost.
Some economists are forecasting the BoE to follow up last month's emergency half-point reduction to 4.50 percent with a cut of one percent this time around given the deterioration in the economic outlook.
Economists expect a cut of half a percentage point to 3.25 percent by the ECB See electronic code book. . Late last month, the US Federal Reserve slashed its key lending rate by a half point to match a historic low of 1.0 percent.
Other markets followed Wall Street lower: Brazil's Bovespa slid 6.03 percent and the Toronto S&P/TSX index lost 2.27 percent.
In Asian trade earlier, however, Tokyo ended with a gain of 4.46 percent, Hong Kong jumped 3.2 percent and Sydney rose 2.9 percent.