Oil prices jumped one and half dollar yesterday on increased violence in the Middle East. Brent crude trading at 109,75. The Head of the military arm of the Hamas Palestinian authority in Gaza was killed along with 10 others in Israeli missile strikes. The new unrest in the region which comes on the top of the Syrian conflict and Iranian-Western tensions on Iran’s nuclear program added to selling pressure on Wall Street. Both Nasdaq and Dow Jones fell substantially. Hardest hit was Bank of America, General Electric, Boeing and Caterpillar. Facebook stock jumped 12,6 percent as a share lock expires. Facebook has fallen more than 50 % percent since the IPO introduction.
In his first press conference after reelection president Barack Obama outlined a compromise on debt/taxes, a new immigration law and renew focus on climate as his immediate priorities. By pledging to raise taxes on the wealthy, Obama set up a drawn-out fight over the fiscal cliff, budget cuts combined with tax hikes. The deadline for reaching a deal between Republicans and Democrats Congress is set to 31st December. With talks over solving the “fiscal cliff” in early stages, investors are reacting to the uncertainty by shedding positions. This points towards a last minute cliffhanger solution. In the meantime the market is going to get punched every day as experienced on Wall Street yesterday.
Without a deal a series of mandated tax hikes and spending cuts will start to take effect early next year. That could push the US economy into recession. Taxes on capital gains and dividends might rise as party of the negotiations. This shall probably push investors to sell in 2012 to pay lower taxes on their gains. Uncertainty inside the Euro zone with the bail-out tranches for Greece still in the air, add to the downside pressure in the equity markets. With the whole Middle Eastern region in deep problems with the Palestinian – Israeli conflict flaring up again, market sentiments remain subdued. Israel is threatening an invasion of Gaza as a following up of the killings. Egypt has recalled its ambassador from Israel in response.
Xi Jinping was yesterday elected new party chief of the Chinese Communist party and received a strong mandate to deal with problems ranging from corruption to economic uncertainty. Asian stocks fell as investors reacted to drawn-out negotiations the “fiscal cliff”. Japanese equities bucked the trend as a sharp slide in the Yen lifted exporters’ shares. The MSCI index fell 0,9 % as did the indexes in Australia and Hong Kong. Copper is weaker and precious metals stabile. Gold at 1725 and Silver at 62,60.
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