[Chart courtesy of MarketWatch.com]
US equities posted modest gains Monday as investors turned cautious ahead of what’s expected to be a tight presidential election Tuesday.
Earlier losses were driven by concerns over a worsening European debt crisis. Greek Prime Minister Antonis Samaras will fight it out in the parliament later this week seeking another round of tax hikes and spending cuts demanded by the country’s Troika of international lenders – the European Commission, the European Central Bank and the International Monetary Fund.
Additionally, jobless claims in Spain rose nearly 130,000 in October, bringing the total number of unemployed to 4,833,521, latest data showed. US equity averages offered little reaction after the Institute for Supply Management’s non-manufacturing index declined to 54.2 last month from 55.1 in September, falling short of 54.5 mark projected by economists.
As a result, the Dow Jones Industrial Average (DJIA) climbed 19 points while the S&P 500 Index (SPX) rose 3 points with energy and materials pacing gains and utilities performing the worst among its 10 business sectors.
The benchmark 10-year Treasury notes advanced for the second straight day after polls showed a close election, boosting the perceived safety of US government securities. The 10-year yield dropped three basis points to 1.68 percent while yield on 30-year Treasury bond sank five basis points to 2.87 percent.
The dollar continued to push higher against most of its rivals with the euro slipping to its lowest level in almost two months as investors moved to the sidelines over renewed uncertainty about Greece’s next tranche of bailout money.
European stocks turned lower Monday as risky bets were taken off the table ahead of Tuesday’s US presidential elections. The Stoxx Europe 600 index slipped 0.6 percent, reversing Friday’s 0.4 percent gain on strong US jobs data. Dutch postal company PostNL NV was the biggest loser on the pan-European index, crashing 11 percent after Q3 profits fell on lower revenues.
Spain continued to weigh on equities after German daily ‘Die Welt am Sonntag’ reported over the weekend the European Central Bank is investigating whether its requirements for Spanish Treasury bills used as collaterals for loans are too relaxed. A central bank representative confirmed the report saying the issue is being looked into.
Shares of Spanish banks retreated with those of BBVA SA and Banco Santander SA falling more than 2.5 percent. The IBEX 35 index lost 1.9 percent.
In Frankfurt, the DAX 30 index tumbled 0.5 percent, led by a 1.5 percent decline in Deutsche Bank. Daimler AG lost 0.4 percent after Goldman Sachs removed the carmaker from its conviction buy list.
The CAC 40 index tripped 1.3 percent after banks Credit Agricole SA and Societe Generale SA gave up 2.5 percent and 2.4 percent, respectively. Oil major Total SA closed 1.5 percent lower.
The FTSE 100 index fell 0.5 percent in London, dragged down banks and resource firms.
Our Trend Tracking Indexes (TTIs) moved only slightly and ended up as follows:
Domestic TTI: +1.59%
International TTI: +3.12%
Tomorrow, I expect the markets to offer a repeat of today but, should the election be decided tomorrow night, no matter which candidate wins, we might see a relief rally based on the fact the endless political jawboning will be finally over.
However, I see any such move short-lived due to the upcoming issues like debt ceiling, worsening European crisis and the fiscal cliff, which have been conveniently pushed on the back burner for quiet some time.