Politics call the tune in U.S, China and Europe

Sun Nov 4, 2012 2:04pm EST
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By Alan Wheatley, Global Economics Correspondent

LONDON (Reuters) - In the politically packed days ahead, an election, a coronation and a two-part parliamentary vote each has the potential to alter the course of the global economy for years to come.

The election, of course, is on Tuesday for the White House and Congress. Two days later, China's ruling Communist party begins the 18th congress in its history.

Barring one of the biggest political surprises in modern times, the carefully choreographed gathering will culminate a week later in the crowning of Xi Jinping as successor to Hu Jintao. He will hold the reins of power for the next decade.

That the world's two biggest economies are choosing their leaders at the same time is unprecedented. Investors are right to be transfixed.

Yet arguably it is a pair of votes in Greece, an economic minnow, on whether to accept labor reforms and more austerity that could have a greater short-term impact on financial markets.

In the U.S. election, markets are pricing in the status quo - victory for Barack Obama in enough swing states to return him to the presidency to renew battle over tax and spending with a hostile House of Representatives and a bitterly divided Senate.

The outcome of talks over the ‘fiscal cliff' - a package of tax increases and spending cuts that will take effect in January if there is no long-term pact to cut the budget deficit - is already a major uncertainty for markets.

Tuesday's voting could muddy the waters even further.   Continued...