- “A Republic, If You Can Keep It.” Noting Benjamin Franklin’s definition of America’s form of government led by the people, U.S. voters decide today whether to grant President Obama another four years in office or hand the keys to the White House to challenger Mitt Romney. Whoever wins, the next president will need to effectively reach across the aisle to resolve the so-called fiscal cliff issues of more than $607B in automatic spending cuts and tax increases. The IMF calculates that unless the U.S. Congress acts, the unresolved fiscal cliff could reduce American GDP by as much as 4.6%, pushing the U.S. into recession. Early signs of an outcome may hinge on voting results in four key battlefield states including Florida, Ohio, Pennsylvania and Virginia. If vote tallies are close or unsettled, the presidential outcome may stretch into days – or with litigation, into several weeks.
- European Economic Developments. German factory orders sank 3.3% in September, falling the most in a year, following a revised 0.8% August decline. Economists’ had expected a much smaller 0.4% decline. Domestic orders fell 1.8% from August, while export orders plunged 4.5%. September’s decline capped Germany with 2.3% third quarter decline in factory orders and a 4.7% YoY decline. Germany’s final factory PMI index was revised worse to 48.4 from 49.3. Adding to evidence of a European slowdown, Britain’s manufacturing output rose 0.1% in September, short of the 0.4% consensus forecast. The U.K.’s total industrial production sank 1.7%.
- Greece Austerity Plans Come Under Fire. A total of 40 Greek central bank officials tendered their resignations over a recent austerity law that caps their gross salaries at €5000 per month (after tax at €2900). Greek unions also began a 48-hour general strike, with 35,000 workers marching in an Athens anti-austerity protest. In a separate report, the European Commission (EC) forecast that Spain’s GPD will contract by 1.6% this year, worse than Spain’s estimate for a 1.5% decline. The EC also forecast a Spanish budget deficit of 8% versus Spain’s outlook for 7.3%. Fitch Ratings raised its sovereign credit rating on Turkey to BB+, handing that nation its first investment-grade rating since 1994.
- Hurricane Sandy Slows Weekly Retail Sales. Data tracked by the International Council of Shopping Centers showed retail store sales fell 0.2% last week, down from a 0.5% increase the week prior. In a separate weekly report from Redbook, chain store sales rose 0.8% from this time last year, down from a 1.8% YoY increase the prior week. Looking at home prices, CoreLogic reported that U.S. home valuations fell 0.3% in September, ending a six-month string of gains.
- U.S. Sector Performance. At press time, seven of the ten major sector groups are in positive territory, led by gains in Energy (+0.9%), Industrials (+0.6%) and Financials (+0.6%). Telecom (-0.3%), Healthcare (-0.3%) and Utilities (-0.1%) are Tuesday’s laggards. Express Scripts (ESRX, -13%) sank on disappointing earnings.
- This Week’s Remaining Economic Calendar: Wednesday: Consumer Credit ($10.2B forecast, $18.1B prior); Thursday: Weekly Jobless Claims (370K forecast, 363K prior), International Trade (-$45.4B forecast, -$44.2B prior); Friday: Import/Export Prices (Imports: 0.1% forecast, 1.1% prior), Consumer Sentiment (83.3 forecast, 82.6 prior), Wholesale Trade (0.3% forecast, 0.5% prior).
