By Emily Kaiser
Traders generally dislike surprises, which can be expensive for those who bet heavily on the wrong outcome, so Arizona Republican Sen. John McCain's strong showing in the "Super Tuesday" 24-state primary contests was welcome news.
"I expected to see a knock-out punch by McCain on the right, and by Hillary on the left," said Chip Hanlon, president of Delta Global Advisors in Huntington Beach, California.
Market reaction on Wednesday was likely to be overshadowed by a more pressing issue, namely the status of a deteriorating U.S. economy that is dangerously close to a recession. Recent data showing that the services sector contracted and the U.S. economy shed jobs in January compounded worries that the next president will have to grapple with serious economic pain.
NO NEW TAXES?
While markets tend to prefer Republicans because of their history of supporting tax cuts and a hands-off approach to regulation, McCain was a somewhat different story. His reputation for independent thinking, which has won support among many voters, left some investors a bit lukewarm.
McCain has said that he would veto any tax increases if he were elected.
However, they said that some sectors of the economy that might be expected to benefit under Republican control, like pharmaceuticals, managed health care, tobacco, and carbon-intensive industries, "might not enjoy as benign a political and regulatory environment under a McCain administration as they have under the Bush administration, judging from McCain's policy stances while in the Senate."
BMO's Busch said investors were not sure what to make of Illinois Sen. Obama, who has pledged support for raising capital gains and dividend taxes -- anathema to Wall Street.
Goldman Sachs noted in an analysis to clients that Clinton had polled worse than Obama in hypothetical match-ups against a Republican candidate. "Her nomination could lead to a closer-than-expected general election campaign," it said.
Many Democrats have expressed concern that China was intentionally keeping its currency undervalued, giving it an unfair trade advantage. They have also pushed for more worker and environmental protections in trade deals.
(With additional reporting by Ransdell Pierson in New York and Kevin Yao in Singapore; Editing by David Storey)
