Analysts have started trying to pick through the repercussions of Barack Obama's victory for markets generally, and individual companies in particular.
On the more macro outlook, Brewin Dolphin's chief strategist Mike Lenhoff has echoed comments yesterday from Morgan Stanley's Teun Draaisma, suggesting much of the bad news in terms of recession may well be in the price. Lenhoff said:
"President elect Obama brings victory for the American people, a fresh start and new hope for the people of the world. But will it be enough to sustain the rebound in equity markets? On the plus side, equity markets are supported by valuations that haven't looked as favourable since the recession of the early 1980s and by the collective effort underway to bring interest rates down. On the negative side, the unhelpful feature remains the prospects for earnings. The major economies are heading into recession and the earnings underlying equity markets are falling sharply. Although earnings expectations are being revised downward, the estimates for next year still reflect a sense optimism not justified by the recessionary environment.
"However, what matters for equity markets is whether they can see across the valley, or indeed, whether there is a valley to see across. Until very recently, there was only the abyss. That the central banks and also the policymakers in governments around the world are responding in a concerted fashion are grounds for thinking that the global economy will find its way out of recession. I don't believe equity markets were so encouraged when they were peering into the abyss only a short while ago."The papers and the News at Ten will deliver the bad news for months to come but our view has been, and still is, that it's largely in the price."
So the - cautiously - positive messages keep on coming, despite the global downturn, and a spate of profit taking this morning which has, so far, sent the FTSE 100 127.84 points lower to 4511.67.
UK figures out today continue to show the scars of the downturn however, piling more pressure on the Bank of England to make an aggressive rate cut of perhaps 100 basis points tomorrow, although that would seem to go against the grain of the Bank's previous slow and steady policy.
Perhaps this will be enough to convince the monetary policy committee: UK manufacturing output contracted 0.8% in September, which is the seventh consecutive fall in output – the longest stretch of falls since December 1980. Meanwhile the CIPS service sector activity index fell to 42.4, which is the weakest since the survey began in July 1996.
And more signs that companies are hurting also came today. Housebuilder Redrow, 14p lower at 197.25p, said reservations were down 45% in the first 18 weeks of trading, while building and maintenance business Rok slumped 51% to 35p after it said projects totally £150m had been cancelled or deferred.
Panmure Gordon said: "We downgrade our stance on Rok to sell. In terms of read-across, the likes of Kier and Morgan Sindall may come under pressure today."
Indeed, Kier is down 30p to 760p while Morgan Sindall is 62.5p lower at 465.5p.
Back with Barack, Singer Capital Markets reckon his election will prove good news for the renewable energy sector. It said:
"Barack Obama wants to spend $150bn over 10 years on clean energy and green jobs. With unemployment at a five-year high, an early effort to create jobs by encouraging electricity production from solar and wind will get top priority, energy lobbyists say. Renewables, including hydropower, account for 8% of US electricity. Obama has said he wants 10% of electricity to come from renewable sources by 2012 and 25% by 2025. The US will become an important part of end-demand for renewable energy products in the future. In the UK we like solar stocks like PV Crystalox (buy, target price 205p) and Renesola (buy, target price 390p). In wind we like Hansen Transmissions (buy, target price 340p), Clipper Windpower (Fair Value, target price 370p - execution risks still present here but valuation looks attractive). These manufacturers of renewable energy products will benefit from US end-demand for renewables. Also, carbon companies like Camco (buy, target price 77p), Trading Emissions (buy target price, 193p) and Climate Exchange (Not rated) could benefit in the longer term from a push for carbon cap and trade systems in the US."
However healthcare group Misys, down 4.5p at 107p, may not fare so well, according to Evolution Securities. It said:
"There's an elephant in the room - the slowdown in US healthcare expenditure erodes the rationale behind Allscripts-Misys merger. Financial services IT spend is decelerating, too.
"Misys' share price has been punished over the past year, even while the sector overall has been coming back. The stock's discount to the UK software sector average, reflecting exposure to financial services IT spend, is unlikely to go away. Sterling weakness is propping up our forecasts for now. The worsening healthcare risk profile should reignite debate over the fundamental rationale for Allscripts-Misys. The shares might bounce short term in a market rally, but we read this as an opportunity to sell."
