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Global Market Wrap-Up - November 7, 2012

Wednesday, November 7, 2012
Mark Hanna
U.S. stocks suffered their worst loss in months as investors turned their attention to the fiscal cliff, and data/comments from Europe after Tuesday night's election results.  With the prospects of another potential stalemate between Congress and the President, the market fell by the largest amount in months; the S&P 500 sunk 2.4% and the NASDAQ 2.5%.   This was the worst loss for the indexes since June.  Not helping matters were comments in the premarket by European Central Bank President Mario Draghi declaring that the economic slowdown had spread to Germany.
  • Fitch Rating said that Obama needs to "quickly secure agreement on avoiding the fiscal cliff and raising the debt ceiling," and cautioned that failure to do so "would likely result in a rating downgrade in 2013." Fitch has so far maintained its AAA rating for the United States.  The credit agency also said that failing to avoid the fiscal cliff would tip the U.S. economy into an avoidable recession and result in an increase in the unemployment rate to above 10% in 2013.
On the economic data front, the student loan bubble continues to grow:
  • Total consumer borrowing rose $11.4 billion in September compared with August, the Federal Reserve said. Total consumer debt outstanding, which excludes mortgages and other housing-related borrowing, stands at $2.74 trillion — the highest level on record.
  • The increase was driven entirely by a category that consists mostly of student and auto loans. Borrowing in that category increased $14.3 billion. Loans held by the federal government, which are mostly student loans, increased $13.8 billion.  Credit card borrowing fell $2.9 billion, the third drop in four months.
Oil tumbled 4.8% to $84.44 a barrel.   Gold fell $1 to $1,714 an ounce while silver dropped $0.37 to $31.66.

Britain's FTSE 100 dropped 1.6% while the DAX in Germany and France's CAC 40 declined 2%.
  • German industrial output took a tumble in September, as falling demand hit the key manufacturing sector. Industrial production contracted by 1.8%in September compared with August; expectations had been for a decline of 0.5%, following a 0.4% drop the previous month.
Asian markets closed before Draghi's comments so were little changed; the Shanghai Composite and Japan's Nikkei both finished fractionally lower.