On Wall Street, quirky Iowa vote quickly upstaged

By Emily Kaiser - Analysis

WASHINGTON (Reuters) - Wall Street gave a passing glance on Friday to the U.S. presidential election kickoff in Iowa, and didn't particularly like what it saw from Republican winner Mike Huckabee or top Democrat Barack Obama.

Attention quickly shifted to the U.S. employment report for December as investors scrambled to figure out whether the U.S. economy would slip into recession this year.

The government's data showed the U.S. economy created a scant 18,000 jobs in December, far fewer than the 70,000 that economists had predicted, and the unemployment rate jumped to 5 percent, the highest since November 2005.

Financial markets showed little reaction to the election news, but the stock market braced for steep losses while prices for U.S. government bonds soared after the employment report cast fresh doubts on the health of the U.S. economy.

The economy is likely to become a bigger factor in the U.S. presidential campaign in the coming weeks as it moves beyond Iowa and next week's New Hampshire primary into more populous states such as California and Florida. Investors will be listening for candidates' plans to fix the imploding housing market or cool inflation.

Those economic issues barely merited a mention in Iowa, where the Republican winner worried right-leaning Wall Street more than the Democrat.

Financial markets typically feel more comfortable with Republicans in power because they are generally more friendly to business on such issues as taxes and regulation. Huckabee, a Baptist preacher and former Arkansas governor, doesn't fit that mold.

"The scary thing about it for me is that he seems like a right-wing populist," said Charles Biderman, chief executive of Trim Tabs Investment Research in Santa Rosa, California. "I'm not sure what his economic platform is and who his economic supporters (are). We know who's backing Hillary (Clinton) and who is backing (Rudy) Giuliani. Huckabee is an unknown."