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Markets Drop As U.S. Election Results Sink In

The combination of the re-election of President Barack Obama and continued Republican control of the House of Representatives means markets face ongoing legislative gridlock and policy uncertainty, says CIBC World Markets Inc. "By adding four more years to Obama's tenure, voters have opted for a known horse over a less familiar one. However, the Republicans' retention of the House and the Democrats the Senate means Obama will face the same fractured landscape that impeded legislative progress during the last two years of his term," it says in a report. "That leaves markets with significant policy uncertainty leading into the fiscal cliff and debt ceiling discussions." Under Obama, growth "will likely track slightly higher" than what a Mitt Romney presidency would have seen since Obama prefers to reduce the deficit via tax increases rather than cuts to government spending. The eelection results in the United States and troublesome economic data from the euro zone are sparking fears of a global slump. After an initially favourable response to Obama’s re-election, investors concluded that the U.S. fiscal crisis could worsen because the vote did nothing to resolve deep political divisions and fled riskier assets for the relative safety of U.S. Treasuries, as worsening economic news out of Europe heightened the gloom. The Dow Jones industrial average plunged nearly 313 points, its biggest one-day decline this year, and the broader Standard & Poor’s 500 index posted its worst day since June with all 10 S&P sectors solidly lower. As well, about 80 per cent of stocks on both the New York Stock Exchange and the Nasdaq ended in negative territory. Canada’s S&P/TSX composite index fell 130.61 points to 12,230.59 with bigger losses held in check by a rising gold stocks.

Courtesy of Benefits and Pensions Monitor website News Alerts

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