Investor Alert

Nov. 5, 2008, 1:04 p.m. EST

World awaits Obama's response to economic woes

Difficult tasks ahead for president-elect

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By William L. Watts and Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) -- A potentially deep U.S. recession and the sharpest global financial crisis since the Great Depression will give Democrat Barack Obama little time to bask in the afterglow of his historic win in the U.S. presidential election.

The decisive election victory "may help to instill a bit more confidence, but the problems have been well-documented," said Kenneth Broux, an economist at Lloyds TSB. "The economy is facing many, many difficulties."

U.S. markets on Wednesday tacked sharply lower while world financial markets were mixed. Strategists said investors are anxious to see the president-elect's next moves.

"The task for the new president is to first restore trust and confidence," said Jim Dunigan, managing executive for investments at PNC Wealth Management. "We saw a little bit of that ... [and] people are hopeful. He's got to deliver on that early."

President Bush on Wednesday said he would work to ensure a smooth transition so the new president can tackle economic and other problems quickly. Obama's presidential rival, Republican John McCain, also pledged support to help end the ongoing financial crisis.

Obama, the first black elected president, captured 52% of the nationwide vote and Democrats extended their majority control in Congress. The 47-year-old senator from Illinois won traditionally Democratic states and made strong inroads in GOP-leaning areas amid intense dissatisfaction with the Bush administration.

"What he did in this campaign was to be all-inclusive," said Colin Powell, a Republican who served as secretary of state in the Bush administration but backed Obama in this race, on CNN.

Yet Obama's party failed to win a so-called supermajority in the U.S. Senate that would have prevented minority Republicans from blocking Democratic initiatives via filibuster. Democrats gained five seats to 56, including two independents, with at least one seat still too close to call. Sixty seats are needed to prevent filibusters.

World reacts

The reaction around the world was largely positive.

"At a time when we must face huge challenges together, your election has raised enormous hope in France, in Europe and beyond," said French President Nicolas Sarkozy.

"This is a moment that will live in history as long as history books are written," said U.K. Prime Minister Gordon Brown, who sent his "warmest congratulations" to Obama.

Japanese Prime Minister Taro Aso said he would work with Obama to "strengthen the Japan-U.S. alliance further and work toward resolving global issues such as the world economy, terror and the environment."

The Russian government, however, reacted cautiously and said it was up to Obama to improve deteriorating relations between the two countries.

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