**01/11/10 - 8.39am - by James Gerrish**
A quite night in the US on Friday with the DOW JONES closing up +4 points or +0.04% to end at 11118. In London the FTSE 100 ended -2 points or -0.05% lower at 5675. Locally, the SPI FUTURES are pricing a rise of 17 points when trading kicks off this morning.
The market was in a holding pattern ahead of a massive week in the US. The FOMC meeting to decide on the size of Quantitative Easing and the mid term elections where the Democrats are tipped to get a drumming. The result of the FOMC is going to have a more immediate impact on the markets with Wednesday evening in the US the main event.
Locally, the RBA decide on rates on Melbourne Cup day and contrary to previous opinions (of mine and others) it now seems that another interest rate hike before year end is a long shot. After the surprise in October the market priced in almost a certainty for November. As we've gotten closer a number of things have changed. There are now clear signs the heat has come out of the housing market, figures from the retailers have been soft and the all important CPI (measuring inflation) came in below expectations.
I'm getting a little tired of discussing the QE2 program so lets have a look at the Mid Term elections in the US. The headline in the AFR over the weekend pretty much sums it up.
MID-TERM MASSACRE ODDS FIRM. The article goes on to outline the discontentment with the Democrats and the likely hood of another hung parliament in the States. If this occurs it will be one of the biggest comebacks in political history for the Republicans and will be a major vote against the Obama Presidency.
In the Mid Term Elections, politicians in the House of Representatives contest their seats as do a large portion of the Senate. Although Obama is safe for another two years, he's no doubt watching as his ability to push through significant reform dwindles along with his parties majority.
It seems that the American's are voicing their concerns about the lingering unemployment, the ineffectiveness of stimulatory measures but more importantly, their anger that Obama is trying to push through such massive reforms in Health Care at a time when survival, rather than structural change is more relevant to your every day voter.
When Obama took over from Bush, he inherited two wars, a deep recession, huge fiscal deficits and a weak labour market. After his election one US publication ran with the headline
"Black man given nations worst job" . Sounds pretty accurate to me.
The immediate impact of the elections on the financial markets are likely to be minimal however we'll look at some of the potential impacts in tomorrows note.
James Gerrish
