Election Ardor Feeds Market Hangover

Victory is sweet -- but short. As Cabinet officials from Finance Minister Alexei Kudrin to First Deputy Prime Minister Igor Shuvalov expressed hope that a Barack Obama win might be a first step forward for global markets, U.S. and international stock exchanges thought differently.

The New York Stock Exchange on Tuesday put up its best Election Day gains on record only to see a sell-off that amounted to Wall Street's worst two days of trading since 1987. Following the U.S. markets with a day's lag, the MICEX and RTS exchanges savored the election Wednesday before falling back in line with their peers eight hours west.

Sorry, kids. The election is over.

While political analysts have suggested that Obama might offer a chance for improved relations between Washington and Moscow -- at least compared with defeated rival John McCain -- politics seemed to hold little sway over Russian stocks' late week performance.

The ruble-denominated MICEX Index ended its brief rally into bear-market territory on Thursday, after advancing five straight days for a gain of 50 percent.

A combination of election excitement, a lull in bad news and generally solid commodities prices managed to pull global markets up in the days before the vote was tallied. The end of the week, however, was spent in a post-election hangover of ugly October figures for the United States, said Vladimir Sinitsyn, a sales trader at Rye, Man & Gor Securities.

U.S. employers cut 157,000 jobs in October, according to an employment report released Wednesday. The news was followed a day later by sluggish monthly sales figures that signaled the start of a retail collapse.

But the week's most anticipated news -- in some circles, anyway -- also turned out to be the biggest disappointment. The U.S. Labor Department said Friday that October unemployment had risen to 6.5 percent, the highest rate in 14 years.

Sinitsyn said the U.S. results were the primary driver behind the Russian exchanges' decline.

"We have to look at the real economy, and at the moment, the situation is not looking any better," he said.

On Friday, the MICEX closed at 725.9, 6 percent below the peak of its five-day rally, with a 3.6 percent gain for the trading day Friday. Sberbank managed to well outstrip the market with a 7.3 percent rise, which Sinitsyn said was likely achieved by the government stepping in to help buy shares.

The dollar-denominated RTS Index dropped 16.9 points, or 2.2 percent Friday, bringing its two-day tumble to 8.3 percent.

Still, some had faith that Obama's win might bring relief from the crisis in the long run, especially in the way of better foreign relations.

Andrew Somers, president of the U.S. Chamber of Commerce in Russia, said he believed that there were "significant chances" relations would improve during Obama's presidency but that it likely would not be enough to turn markets around.

"Investors are probably the most cautious people in the world," he said. "I wouldn't expect them to start investing just because a president was elected."