U.S. Election Rally, Europe Up 3%

123jump.com Staff
04 Nov, 2008
New York City

U.S. stocks rallied on the election day on the hopes that the new leader will represent a change in the economic direction. U.S. Treasury may invest directly in non-financial companies through its bank rescue plan, a departure from its original goal. Paulson credibility takes another knock.

[R]12:01 p.m. New York – European markets close up between 3% and 4%. The U.S. market indexes surged more than 3% on the hopes that newly elected leader will represent a change in the direction for the economy.[/R]

U.S. stocks traded higher and European markets surged between 3% and 4% at close. The U.S. stocks gained on the hopes that newly elected president may improve the economic prospects of the country.

Democratic Party candidate Barack Obama is leading in the polls and the Democratic Party is expected to control the White House and U.S. Congress.

U.S. Treasury may invest in non-financial companies through its Troubled Asset Relief Program. The move, if conducted will be a sharp departure from the goals outlined to the U.S. Congress by the Treasury Secretary Henry Paulson. Secretary Paulson has been under fire for not demanding stringent lending requirements from banks to consumers and home owners.

Several banks have stated that majority of the money provided by the Treasury will be used to repair their balance sheets and not increase lending, in sharp contrast to what Secretary Paulson promised to the U.S. Congress.

The possibility of the investment in non-financial institution was first reported by the Wall Street Journal.

Dow Jones Industrial Average surged 2.9% or 268.97 to 9.588.80, S&P 500 index increased 3.5% or 33.34 to 999.64 and Nasdaq Composite index increased 2.6% or 45.06 to 1,771.39.

MasterCard ((MA)) surged 14% to $163 after it reported better than expected earnings adjusted for legal settlement charges.

European markets surged after the interbank lending rate declined in London. The Libor fell to 5-month low to 2.71%, a decline of 15 basis points. Insurance and banks gained more than 10% on the weakening of the rates. However, the rates are still at nearly 3 times the level before the collapse of Lehman Brothers.

The earnings from Swiss specialty chemical maker Clariant surged 17% and UK retailer Marks & Spencer rose to 223.2 million pounds. The better than earnings helped the trading sentiment.

The European Central Bank and Bank of England are likely to lower rates on Thursday.

Asian markets rallied after the interbank lending rates in Japan fell nearly 10 basis points and the Reserve Bank of Australia lowered the key lending rate 75 basis points to 5.25%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 537.62 or 6.27% to 9,114.60, Hang Seng index in Hong Kong increased 39.97 or 0.28% closed to 14,384.34. CSI 300 index in China lower 25.78 or 1.56% closed to 1,627.76. ASX 200 index in Australia decreased 6.40 or 0.15% to close 4,215.10. The KL Composite index in Malaysia higher 6.23 or 0.69% closed to 905.58.

The Kospi Index in South Korea increased 24.27 or 2.15% to close at 1,153.35. SET index in Thailand closed higher 8.43 or 1.88% to 457.62 and JSE Index in Indonesia increased 17.07 or 1.26% to 1,369.78. The Sensex index in India increased 293.44 or 2.84% closed to 10,631.12.

Europe Markets Review

In London FTSE 100 Index closed higher 143.44 or 3.23% to 4,586.72, in Paris CAC 40 Index increased 128.38 or 3.64% to close at 3,656.35 and in Frankfurt DAX index higher 186.00 or 3.70% to close at 5,212.84. In Zurich trading SMI increased 146.74 or 2.35% to close at 6,380.62.