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Obama victory sparks profit-taking in US, European stocks

Wall Street and European stocks fell back Wednesday as investors buckled down for an expected 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.

They said the markets realise that little can happen immediately, with Obama due to be sworn in only in late January, and the global economy faces serious headwinds regardless of the political leadership involved.

"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.

"There is an element of 'buy the rumour, sell the news' that is driving some profit-taking to kick in," he added.

On Wall Street, 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.
 was down 2.39 percent at around 1700 GMT (Greenwich Mean Time) See UTC.

GMT - Universal Time 1

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 points. 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 points and in Frankfurt, the DAX lost 2.11 percent to 5,166.87 points.

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.

US stocks staged a powerful rally on Tuesday, with the DJIA DJIA

See Dow Jones Industrial Averager (DJIA).
 up 3.28 percent which gave the Asian markets a good start but this was not carried over into Europe.

Obama, an African-American Illinois senator campaigning for change after eight years under the Republican administration of President George W. Bush, defeated Republican John McCain to become the 44th US president.

Obama faces a global financial crisis and a host of domestic problems in the economy, including rising unemployment, falling home values and slowing exports when he takes office on January 20.

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.

 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

Up to Obama's inauguration in January, "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.

In other European markets, Madrid edged up 0.18 percent, Milan fell 1.44 percent, Brussels lost 1.53 percent and Switzerland was down 3.48 percent.
Copyright 2008 AFP Asian Edition
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Publication:AFP Asian Edition
Date:Nov 5, 2008
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