Market update: Shinzo Abe’s victory not enough to catalyse markets

Wall Street dipped lower on Friday (S&P 500 Index -0.4%; Dow Jones -0.3%) as investors worried that politicians were taking too long to negotiate a compromise deal on the US fiscal cliff. While the political backdrop was frustrating, economic news flow was more encouraging. US consumer prices fell in November due to a sharp drop in petrol prices and US factory output increased 1.1% in November from October as manufacturing rebounded after Hurricane Sandy. Data from China was also very encouraging; Chinese manufacturing grew to 50.9 in December, its fastest pace in 14 months, according to the HSBC/Markit Purchasing Managers’ Index survey.

The mood in Europe this morning is rather downbeat (FTSE Eurofirst 300 -0.3%; FTSE 100 -0.4%). Sentiment has not been lifted, despite the news that the Liberal Democratic Party (LDP), led by Shinzo Abe, has won a conclusive victory in the Japanese elections. The two-thirds majority that the LDP-led coalition has won in Japan’s lower house should help it override most decisions by the opposition-controlled upper house. In company news, Aggreko (temporary power generation equipment) has slumped after issuing a weakened outlook due to a reduction in military revenues and uncertainty about Japanese contracts.