Election week is upon us and while the FTSE got off to a rocky start the numbers from HSBC saw a quick reversal. The pound, however, is feeling the pain as the uncertain outcome over the election is sending sterling lower.
Financial markets are very fickle, and without a clear answer to who will be in Downing Street come Friday, dealers are giving sterling a wide berth. Investors will wait out the election and when the dust settles next week we will see more confidence in the London market. IG's general election binary is indicating the Conservatives will win 291 seats while Labour will take 267 seats. IG’s general election binary on who will be the next prime minister is indicating a 53% chance of Ed Miliband and a 47% chance of David Cameron, and this election will be about which party will find it easier to cobble together a deal with rivals.
We are one week away from Greece’s repayment to the IMF, and the pressure is still on for the struggling country as the Athens administration has yet to agree a number of reforms with its creditors to free up the next round of cash. Greece's repayment next week is by far the smallest of the three that are due between now and August, and the pressure is only going to ramp up for the debt-ravaged nation. Greece has a track record of brokering a deal at the last minute, but in the meantime the eurozone equity markets will edge lower.
Shares in Aberdeen Asset Management have slipped this morning despite a strong set of first-half numbers. The fund manager weathered the emerging markets storm well and went on to reveal higher revenue and underling profits, and while the Federal Reserve keep sitting on their hands over interest rates the emerging economies will stay stable.
HSBC hammered market estimates as first-quarter pre-tax profit came in at $7.1 billion, which was 22% higher than the market expectations of $5.8 billion. The bank has hefty compliance costs in order to meet tougher regulation, and its healthy capital structure will help change its image in the wake of the Swiss tax evasion scandal.
We are expecting the Dow Jones to open five points higher, at 18,075, as the dovish comments from Charles Evans yesterday still resonate with traders. Mr Evans stated that rates should not rise in the US until 2016 due to the soft start to 2015.