Tuesday’s election will determine the next president of the United States, the largest economy in the world; however it is probably its psychological impact that moves the market on a daily basis rather than any speculation about the possible outcome from an economic plan.
Red or Blue!
Some analysts believe that a Republican administration may look more market-friendly but it is also possible that a decisive victory by the Democrats would be encouraging if it can improve the sentiment and make people more optimistic.
European Commission will release its estimate for economic growth in euro-area on Monday. Recent data showed that the economy have already contracted in the U.S. and U.K. when other reports this week, from manufacturing and service sectors in the U.S, U.K, and Germany, may also show that there is no end for this slowdown in the near future. At this time it is also probable that the market interpret negative data as the possibility of more rate cuts and for a longer period of time.
Easing Policies Continues
Monetary policies become more and more accommodative as the central banks continue to lower the borrowing costs. European Central Bank, Bank of England, and the Reserve Bank of Australia all are expected to cut interest rates this week. However any rate cut less than the expectations could be completely disappointing to this fragile market.
Considering the last week reaction to the U.S. GDP, one may conclude that the market tends to see the glass half full than half empty! But it may not be the case when it is about heavy job losses. Friday is certainly the most important day of the week when the employment report may show that the U.S. economy has lost as much as 180,000 jobs in October; and it is difficult to imagine the market patient when the unemployment rate rises above 6 percent.