A hung parliament? what does this mean for markets worldwide?

Money markets across the globe are predicting that there might be a slim chance of hung parliament in the UK

A hung Parliament is a particularly intriguing outcome, given it has not occurred since a brief Labour-Liberal coalition in 1974.

Reuters highlights the fact that if neither Labour nor the Conservatives win an overall majority in Parliament, the Liberal Democrats will become the kingmakers:Reuter's said"Once clearly the centrist choice in British politics, they have in some respect drifted to the left of the Labour Party since Tony Blair's election victory in 1997."

If that was to be the case it would mean an uneasy partnership with Labour and Lib Dem parties The hung parliament would be overseen by Gordon Brown and Vince cable from the Lib Dems


It is unsure what this partnership would lead to, particularly given the lack of open discussion over the issue. On the other hand there may be benefits in terms of less cost cutting measures and more authority over the Financial institutions

This might put off future investors, especially in money markets such as forex as the UK's financial luxuries may be limited

If opinion polls suggest a so-called hung Parliament is a mounting possibility ahead of the election,The worlds investors will pay close attention to party policies There will be much scrutiny of Nick Cleggs Lib Dems party policies for sure!

The Conservatives will require approx ten percent increase in the polls to gain a majority This is way more than Labour would need.An internet poll stated the following lead statistics: Labour Party 32 percent, Tory Party 38%, a lead of six%This would result in a hung parliament

"A split in the government would mean that people would see a sharp spike on the gilt and equity sectors first", said a source from F&C Investments In the late seventies, after tasting defeat in some by-elections they were faced with a split parliament again The Labour party joined a coalition with the Liberal Democrats who were at that time lead by David Steel, this was to prove a costly mistake!

If the voting public cannot reach a decision then the same decisions may need to be made again!!

It would make sense for the Tories or Lab to choose the Lib Dems for a coalition venture however the Lib Dem shadow chancellor Vince Cable will be one of the most people The Lib Dems Shadow chancellor was a vocal and opinionated politician when it came to the credit crunch and the economic downturn

While the markets would not welcome the idea of a minority government, a coalition with the Lib Dems may bring some equanimity to equities and bonds. The lib dems will want to attack the UK's massive debt and would, therefore, demand severe policy measures to attack the public sector deficit, This is most likely to be welcomed with open arms by the worlds traders

Meanwhile, homeowners could find their mortgage costs rise by as much as £624 a year in the event of a hung Parliament, according to flat share website easyroommate.co.uk


Mortgages rates are linked to the wider financial market. If the worlds monetary markets are worried that the government will be unable to deal with the Uks debt issues then rates may rise leading to increases in mortgage prices A rise of between 0.5-0.0.75% in gilt yields would be a modest shift in the case of a split parliament