THE US election and its aftermath are perhaps the sole focus of attention this week as the US goes to the polls in what promises to be a very close call. With evidence of a slow but steady US recovery and 171,000 new jobs in October, the unemployment rate has just dropped back below the politically sensitive 8% level.

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Concerns about the severe damage done by the hurricane Sandy have given way to a sense of optimism over the outlook for the global economy, as recent US data releases have been broadly positive, accompanied as they were by signs that Chinese manufacturing has taken a turn for the better.

Nevertheless post election, the presidential incumbent will have to face up to government spending cuts and tax rises widely referred to as the “fiscal cliff.”

Unless laws are changed, tax cuts from the Bush era are soon to be reversed and the post credit crisis stimulus package expires at the end of December, while federal budget cuts kick in. This could amount to a 4% drag on the US economy.

Despite this US investors are prepared to believe that laws will be changed and the damage contained, which is why some market pundits believe that US equity markets are due for a rally, no matter who wins.

In the UK, investors have been encouraged by somewhat better than expected corporate results such as Weir Group yesterday, and this has ensured that the UK index has remained above key support in the region of 5790. Interim results are also due today from Marks & Spencer and full year results from Associated British Foods. Half year results are also due from Burberry tomorrow and Tate & Lyle report on Thursday.

: : Mark Marshall is a stockbroker with Charles Stanley & Co

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