UK election campaigns to start

Summary:

• PM Johnson to ask to dissolve parliament

• Conservatives draw unwanted (and wanted?) scrutiny

• German stocks reach highest level since June 2018

Even though it’s only just a little more than 24 hours until the Bank of England (BoE) announce the outcome of their latest policy decision, politics is unlikely to drift far from the front of investors’ minds with the general election campaigns set to begin today. Recent days have seen a small pick-up in UK survey data, albeit against a low bar, but the markets sensitivity to these and the upcoming BoE decision is fairly low with politics continuing to dominate. PM Boris Johnson will ask the Queen to dissolve parliament and in doing so mark the start of the campaign for the December 12th election. 

There’s an 11 point lead for the Conservatives according to a poll of polls as the parties are set to officially begin their campaigns.  Source: FT

The Conservatives enjoy a sizable lead in popular opinion polls, but this could well give a misleading picture of their true position when it comes to picking up seats. Yesterday the party was marred by two mini-scandals with first Jacob Rees Mogg’s comments on the Grenfell Tower fire providing plenty of ammunition for those who brand the Tories as aloof and out of touch before a doctored tweet from the official account revealed that the darker arts of politics will be regularly seen in the run-up to the polls. The remarks from Rees Mogg were no doubt insensitive but a swift apology would have probably put an end to the matter had it not been for some quite remarkable comments from fellow Conservative MP Andrew Brigden. 

The video circulated by the official Conservatives twitter account which had been edited to show Labour’s Keir Starmer seemingly failing to answer a simple question on Brexit sparked outrage on social media, but this was perhaps the intention. The extra attention this drew to a key issue that the Tories want to promote (IE Labour indecision on a Brexit policy) had several of the hallmarks of a Dominic Cummings strategy and was likely intentionally created to create drama, drawing additional attention and despite being misleading increasing the focus on a key point the Tories want to drum home. Expect far more of this sort of thing in the coming weeks as politicians from both sides will look to exploit whatever advantage they can in the run-up to what remains a highly unpredictable election that has a good chance of throwing up a big surprise. 

Improved German data sends stocks to new 16-month highs

Two economic indicators released from Germany have painted a better than expected picture of the Eurozone’s largest economy, in keeping with a global shift of late that has seen a general improvement on the data front. At present these are little more than green shoots at the start of a possible recovery but it’s important to note that while economic activity has been subdued for much of the year, stock markets around the globe have enjoyed a good run higher largely thanks to further policy easing from central banks.

US-Sino trade developments have promptly filled the void left by near incessant Brexit news and taken over the mantle for headlines in a similar vein, with a lot happening but nothing really changing. In a fashion reminiscent of last month’s advance in the pound, stocks are rallying more on upbeat rhetoric rather than concrete developments. The FTSE continues to lag it peers with the benchmark struggling to break decisively up through the 7400 mark, as the German Dax this morning posted a new 16-month high and Wall Street ended yesterday at its highest ever closing level.       

The FTSE remains well below its YTD peak as European and US benchmarks make new highs. The lack of recent momentum to the upside can be shown by the 100 SMA which has had a negative gradient for the past few months. Source: xStation