Concerns regarding the Fiscal Cliff

U.S. politicians continue to wrangle and it seems like until democrats and republicans do not reach an agreement regarding the Fiscal Cliff, stock markets will continue reacting.

Last week, the parties entrenched in their positions.

While the republican’s proposal last Monday did not include tax increases for the rich, U.S. President Barack Obama made it clear that a tax rise for the top 2% of high earners was unavoidable.

Summing up the week it seems that there are still significant differences between the two parties, but most estimates that an agreement will be reached by the end of the year, simply since U.S. leaders want to avoid another economic spin.

Is QE3 program increasing?
The Fed will publish on Wednesday whether it place to increase bond purchases as part of the QE3 program.

Note that uncertainty regarding how the Fiscal Cliff will be solved increases the chances to enhance QE3 program at the next meeting.

On the other hand, only two weeks ago Fed chairman Bernanke said: “It is early to assess the full effects of our most recent monetary policy actions”.

<h3>Economic data:</h3>

American labor market was relatively good, unlike economists’ consensus estimations.

The labor department noted that hurricane Sandy did not substantively impact the national employment and unemployment estimates for November.

The Non-farm payroll data indicated an addition of about 146K net jobs in the labor market in November (versus expectations for 85K), similar to average recruitment in the previous three months.

This is coming after last two months’ data were revised downward by 49K jobs.

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