Barack Obama’s victory in the presidential election failed to lift the markets yesterday as investors’ focus switched to the looming “fiscal cliff” in the US and downgraded economic forecasts across Europe.
The Dow Jones Industrial Average ended the session down 2.36 per cent at 12,932.73, while the S&P 500 lost 2.37 per cent to finish at 1,394.53 amid uncertainty over how the president can avoid the cliff – a raft of automatic tax increases and spending cuts that could plunge the US back into recession. The FTSE 100 lost earlier gains to close 1.6 per cent lower at 5,791.63.
ETX Capita market strategist Ishaq Siddiqi said: “It is questionable if Wall Street is reacting this way to Obama’s victory or rather the ugly economic data from Germany earlier and the EC making deep cuts to 2012 growth forecasts for eurozone nations.”
The German government’s independent economic advisers expect Europe’s largest economy to grow just 0.8 per cent next year, while the European Commission forecast a 0.3 per cent contraction in gross domestic product for the region as a whole this year, rather than remaining flat as it had predicted in the spring. The Dax in Germany and France’s Cac-40 both fell by 2 per cent.