The market implications of the UK’s spending shortfall

The lack of much reaction on net in markets to today’s statement by the UK’s new Chancellor suggests to us that investors remain confident in the Labour Party’s commitment to fiscal discipline. But the disputed ‘revelation’ that the country’s public finances are in even worse shape than previously assumed may quell the feeling of optimism that temporarily buoyed sterling – and some UK financial assets – in the immediate aftermath of this month’s General Election.