Hands up anyone who, based on last night’s leaders debate, changed their minds over who they would vote for in the General election. Anyone…….anyone…..? Of course not. This confrontational X-Factor style politics is such tosh. The markets certainly weren’t swayed in either direction. Sterling lost a little ground yesterday but has stayed in the midst of its recent ranges.
It is rare for a prospective Prime Minister to openly tell business leaders they will be worse off if he is elected but that is what Boris Johnson did yesterday at the Confederation of British Industry (CBI) Annual Conference. His withdrawal of a prospective corporation tax cut and the use of those funds for NHS projects was a surprise to those present. Interestingly, his approval rating rose on the announcement and the Conservative Party’s lead grew through the day. As that happened, Sterling also gained ground
It is almost not worth commenting on the UK elections; all the parties are spewing spending plans; none of which are truly credible but we all nod and smile. You could describe the policies of the three main parties as ‘In’ (LibDem) ‘Out’ (Tory) and ‘shake it all about’ (Labour). The Hokey-cokey election has started.
Signs of political shifts are the focus for UK news in the run up to the General Election. It seems from a new poll that more “working classes” are supporting the Conservative Party, rather than their traditional supporter base of “upper classes”. A survey by ComRes for The Daily Telegraph reported an eight percent increase in voters in the DE socio-economic group are willing to vote for the Conservatives in the 12th December election, compared to the previous election in 2017. In contrast, the number of voters in the AB group saying they support Boris Johnson’s party has fallen by six percent since they voted for Theresa May’s Conservatives in 2017, and the Centre for Social Justice has also found in their survey last week that support for Jeremy Corbyn’s Labour Party has fallen ten percent with voters on a total income below £17,000.
The week started slowly on the data and economic front, with Veterans Day in the USA and a number of public holidays across the globe to remember those we lost in past conflicts. This didn’t stop currency or stock markets from moving, however, or indeed stop politics from influencing these market movements.
The Conservative Party extended their lead in most polls after the Brexit party’s decision to stand down most of their candidates. Nigel Farage is suggesting the Tories should stand down their own candidates in constituencies where they haven’t won for 100 years to improve the Brexit party’s chances where they are fielding candidates. Either way, the Pound held on to its gains yesterday after the unemployment rate fell to 3.8%, but average earnings growth slowed to 3.6%; lower, but still more than double the rate of inflation. Speaking of which, we will get the UK consumer price inflation data this morning. Something like 1.7% is the most likely outcome. Sterling should maintain its strength unless the actual data disappoints.
Nigel Farage gave Sterling a boost yesterday by announcing that he will not field candidates in Conservative held seats but will challenge labour seats with Brexit party candidates. Sterling’s rise doesn’t necessarily mean the markets favour the Tory party, as some have suggested. It does mean though that the certainty that comes from an overall majority is more to the liking of finance markets that hung parliaments or minority governments and the uncertainty those outcomes elicit.
Accountancy firm, BDO, says their survey showed business confidence in the UK at a seven year low. Is anyone surprised? I thought not. Of those seven years, nearly three and a half years have been lived in the vacuum of uncertainty caused largely by dithering and conniving politicians. However, we will get confirmation of the Bank of England (BoE) leak of 0.4% Gross Domestic Product (GDP) growth in Q3. In the end the number was actually 0.3%, that is 1.0% in the year; not great but neither is it a disaster. This morning also brought UK industrial production and manufacturing production data, both of which fell short of expectations. We also had a larger than expected trade deficit. Oh, there will be some politics as well, just to keep everyone guessing. Sterling held up well in spite of the poor results.
The Pound has faltered following the Bank of England (BoE) vote – the 7-2 vote to leave interest rates at 0.75% came as a surprise, as Monetary Policy Committee Members (MPC) Saunders and Haskel voted for a rate cut. That is a clear sign of the economic uncertainty being felt by policymakers and this was reiterated by Governor Mark Carney in his commentary afterwards, when he said that a rate cut would be an option if the global slowdown continued and if there was further Brexit uncertainty. This lack of confidence meant that the Pound disappointingly dipped below 1.28 against the US Dollar.