With the U.S. elections behind us, the situation in Europe and the American fiscal cliff are now front and centre in investors' minds. European Central Bank (ECB) President Mario Draghi stated yesterday that the economic situation on the Old Continent was deteriorating and that the ECB was prepared to take action on markets. We are therefore carefully monitoring developments in credit spreads in Spain and Italy, which have been widening over the past few trading days.
Fears surrounding the U.S. fiscal cliff could continue to serve as a pretext for additional profit-taking over the coming weeks. Although politicians will probably come up with a last-minute solution, it does increase fears for a return to recession for the U.S. economy. This increased risk aversion is weighing heavily on U.S. equities, the loonie and crude prices, which are down 4%, 2% and 8% respectively since the start of the fourth quarter.
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