Financial markets are facing a period of instability after a dramatic night on both sides of the Atlantic overnight with former FBI head, James Comey testifying about his sacking and accusing President trump of telling lies, while in the UK Prime Minister Theresa May’s snap election seems to have backfired badly.
The UK looks like its facing a hung parliament with the Conservatives short of a majority and being forced to face a coalition government as it faces Brexit and the pressures that will bring.
Early poll results, while confirming that there has been a swing to labour, said it wasn’t as big as suggested in the exit polls. But analysts noted these early results came from the North east of the UK where the Brexit vote surprised last June with the size of the swing in favour of leaving the EU.
But we should be wary of the poll because in 2015 it was wrong and the Conservatives led by David Cameron won more seats and managed to govern in its own right.
At the same time the European central Bank revealed it is no longer interested in cutting interest rates, but made it clear its massive quantitative easing would continue for an indefinite period as the eurozone economy strengthens.
James Comey’s testimony raised more questions about Donald Trump pointing to more diversions for the President to battle with as he struggles with his policy implementation.
Reaction to the dramatic events will dominate markets in Asia, starting with NZ and Australia, then Japan, Hong kong and China. The UK stockmarket lost ground during the day, but closed well before the polls finished.
Oil prices dipped, as did gold overnight. Wall Street rose cautiously. In currency markets, the pound fell to a seven week low on the results of an exit poll showing the possibility of a hung parliament. The Aussie dollar remained well above 75 US cents.
The overnight futures market saw a 10 point gain for the ASX 200, but the confusion from London and the weakness in the pound might see a day of hesitation for local investors, especially ahead of a long weekend in much of Australia.
The exit poll for the BBC and Sky News, released right after the polls closed at 7 am Sydney time, said Prime Minister Theresa May will win 314 seats in Britain’s election, short of a majority in the 650-seat parliament, and the loss of a dozen or so seats from what the party had before the poll was caused.
The poll predicted 266 seats for the opposition Labour Party run by Jeremy Corbyn, 34 for the Scottish National Party and 14 for the Liberal Democrats, plus seats for Northern Ireland Unionists and nationalists.
But there should be a note of caution: UK analysts point out that the exit poll had 76 seats too close to call.
At the 2015 election, the exit poll had Conservatives on 316 seats – short of an overall majority. They finished on 330.
The exit poll might also be wrong because it doesn’t include postal votes, points out Bloomberg’s.
The Financial Times reported that in 2015, 20.5% of votes were by post.
"Those voters are likely to be old, and Conservative-leaning. And in 2015 the proportion of postal votes was highest in the north-east, the north-west and Yorkshire and the Humber – all of which are Conservative target regions this time,” the paper said.
