Markets shrug off hung parliament (Jun 10)

As we expected, markets largely shrugged off the heightened political uncertainty of the last month, suggesting that a hung parliament outcome to the general election was already priced in. Instead, the sharp drop in global market confidence and pick-up in volatility in the wake of the Greek sovereign debt crisis proved to be the dominant influence on UK markets. Meanwhile, markets continued to revise down their expectations for official interest rates, suggesting that they have become increasingly concerned (and rightly, in our view) that the UK’s recovery will lose momentum when the ‘Great Squeeze’ begins.