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The election is finally over and everything remains the same

The result is being treated as a relief that the election is finally over and that there has been a clear cut result. Basically everything remains the same.

So after initially selling off in Tokyo hours- US S&P 500 futures are now in positive territory after rallying 0.75% yesterday.

US Treasuries- initially rallied in Asian trading with 10yr yields falling from 1.75% last night to 1.67% before weakening to currently trade at 1.71%.

There has been little buying this morning but this comes ahead of the auction of $24bln new 10yr notes this evening and $16bln new 30yr bonds tomorrow. So investors will have plenty of chances to add to their positioning over the coming days. Yesterday's JPM Client survey of US Treasury investors showed that the vast majority of investors had a neutral positioning ahead of the election.

There is also an auction of 5yr German bonds this morning which is pressuring German yields higher.

The US$ has weakened and the DXY is down 0.6% in the past 2 days. This is due to the expectation of a continuation in the Fed's QE programs. It has led commodities and in particular Gold much higher. Gold is $40 higher in the past 2 days and €30/toz. Copper is not rallying as much only up 1.5% in the past few days and is turning around today.

Every day that goes past the US fiscal cliff will draw nearer. There will be a pause in concern for the next few days as the President and the Congresses get back to work. But if the partisanship continues than the risk that the US economy faces severe austerity next year, similar to that which is hitting Spain and Greece, has to hurt risk markets and raise implied volatilities. Therefore any asset class that assumes wealth creation next year, Gold in particular, has to be re-priced lower.

Greece now comes centre stage. Here the new MoU has been approved at the Parliament's committee level and after another day of the General strike should be passed tonight, around midnight local time. Then the talk will start about the details of the 2013 budget. This is where the debate will really hot up as the specific cuts are discussed. If it passes then the next step would be the ratification of changes to the past bailout program by some of the Euro zone parliaments where it will face criticism from German, Dutch and Finnish parliamentarians.

All this should mean that after a pause for breath today the markets will become very jittery again.

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