Article / 08 May 2015 at 7:05 GMT

Morning Markets: Cameron's spectacular triumph

Former managing editor, TradingFloor.com / Saxo Bank
Denmark


brick

Watchlist

  • Reserve Bank of Australia quarterly statement (0130 GMT; already released)
  • China Trade Balance (0359 GMT; already released)
  • German Trade Balance (0600 GMT)
  • German Industrial Production Index (0600 GMT)
  • Spain Industrial Production (0700 GMT)
  • China CPI (0715 GMT)
  • Italy Industrial Production (0800 GMT)
  • GB Trade (0830 GMT)
  • Greece CPI (0900 GMT)
  • US nonfarm payrolls (1230 GMT)
Hung maybe, not drawn and most definitely not quartered if you come at the UK election from the Conservative perspective. David Cameron's party against all the odds and expectations is on the cusp of securing a majority with projections now for 329 seats, just over the magic 326 number. 

For Labour, it's been a disaster with projections at just 233 sounding the death knell for Ed Milliband. Nick Clegg will be on his way too after the Lib-Dems spectacular collapse to an anticipated 8, down from 56 in 2010.
 
Labour's implosion can be directly attributed to the rise of the Scottish National Party which is expected to take a whopping 56 seats north of the border. Scottish nationalism is well and truly alive and is no doubt ready to deal out a few kickings in Westminster when the opportunity arises.

Cable is riding high (it hit a high of 1.55208 overnight) and can expect a short-term fillip from Cameron's victory but, despite UKIP's failure to make a real breakthrough in electoral terms, the prospect of a referendum on Europe draws closer sending a shiver down the spine of those vested interests in Brussels. The FTSE is also expected to jump 100 points on opening.

Which of course leaves us with nonfarm payrolls out today at 1230 GMT. Dollar's month-long hangover after that dismal print in March might at least get the boost it's been looking for if consensus for a return to plus 200,000 prints proves correct. Certainly, EURUSD has been weakening today in the run-up to that print.

In Asia meanwhile, stocks were higher across the board ironically after disappointing Chinese data helped swell expectations that the People's Bank of China might intervene to prop up the markets with some RMB 600 billion in the coffers.

v

 
Market signals


Asian session

  • Tokyo shares rebounded from lows; the Nikkei 225 was up 0.69% to 19,423.08 at 2.22pm
  • China's exports slumped by 6.2% in April, adding downward pressure on the economy
  • China's imports took a sharp double digit tumble – down 16.1% in April
  • The poor trade result may prompt Beijing to cut interest rates or take stimulus steps
  • The Australian dollar took a slight knock from the weak China data before rebounding

Forex ahead

  • Cable jumped to 1.5525 and will be expecting to rise after Cameron's decisive victory
  • Volatility in cable moved significantly to the left, particularly in the front end of the curve.
  • Monday cable options traded with a volatility of approximately 17.5%
  • Vols likely to move down to approx. 13.5% as Cameron's triumph becomes clear
  • One-month cable and EURGBP straddles open at 9.55% and 9.4% respectively
  • One-month cable vols collapsing after election result, down from 13 to 9.
  • Bias for cable and EUR/GBP options still remains vaguely neutral but watch for change.

From the Floor

Great expectations. “NFP today is the most important one for several cycles, it’s a two-way risk,” says Hardy

Pounding higher. “Cable is now coming off its highs on a buy the rumour, sell the fact basis,” says Moltke-Leth

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Come on US
Juhani Huopainen says investors see the low 126,000 payroll figure for March as a seasonal anomaly, and the consensus view for today's April payroll reading is a stronger 228,000 jobs.

Cut contagion
Max McKegg says that the money markets expect the Reserve Bank of New Zealand to join its Australian counterpart and cut its 3.5% policy rate sooner rather than later.

Good call
Alibaba beat all growth expectations for mobile platform transactions in Q4, and the e-commerce giant is working on extending its reach deep into rural China, says Neil Flynn

There'll always be an England
By now, we should be getting a clear picture of the outcome of the UK election, but if indeed the SNP finds itself in the centre of machinations, might England go it alone, asks Stephen Pope.

Link jinks
Social media jobs network LinkedIn may have taken a 20% plus hit in its share price after last week's disappointing earnings release, but Serge Berger reckons its due for a bounce back.

Smart money
Blackrock investment strategist Wei Li gives us the lowdown on why Exchange Traded Products should become attractive in a zero-inflation low-yield world [video]

v

She was ousted from 10 Downing Street by her own party in rather an unseemly manner, but he looks like he can put away that number for the removals van for the foreseeable. Photo: iStock

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4y
Martin O'Rourke Martin O'Rourke
The FTSE is up 1.53% to 6,992 at 0736 GMT. GBPUSD has slipped below the 1.50 mark to trade at 1.5481
4y
Martin O'Rourke Martin O'Rourke
below the 1.55 mark that should be for GBPUSD
4y
jeeve777 jeeve777
sir should i sell gbpusd here
4y
Martin O'Rourke Martin O'Rourke
Hi jeeve777. I would take a look at what our head of forex strategy john J Hardy has to say in his update this morning. https://www.tradingfloor.com/posts/fx-update-strong-us-jobs-could-reverse-sterling-shock-4735795 He talks about the UK election at length and the impact on GBPUSD. In general terms, it would be a good idea to follow John https://www.tradingfloor.com/traders/john-j-hardy if you are interested in forex markets. You wlll then automatically receive a notification every time John posts on TradingFloor.com
4y
Martin O'Rourke Martin O'Rourke
The latest forecast on vote share from the BBC is expected to give the Conservatives 37%, Labour 31%, UKIP 13%, the Lib-Dems 8%, the SNP 5%, the Green Party 4% and Plaid Cymru 1%.
4y
jeeve777 jeeve777
thanx Mr. martin... currently conservative party is very close toward winning these election.. and SNP performed great in this election with 56 seats..
4y
Martin O'Rourke Martin O'Rourke
Yes. Whatever way you look at it, it has been a very dramatic night in the UK and has made the pre-election polls look rather foolish. It is only a slight majority that the Conservatives look likely to get, but in the context of the expectations, it's a dramatic and completely unexpected outcome. As far as Scotland is concerned, there is a sense that while the Scots did not grasp the opportunity for independence last September, the whole process helped to swell the standing of the Scottish National Party and sweep it to victory so expect referendum pressure to build again. For Labour and the Lib-Dems, it's an absolute disaster and the latter face a serious battle to retain credibility as the third party of UK politics in light of the SNP performance and UKIP's share of the overall vote (projected at 13% to Lib-Dems 8%).
4y
jeeve777 jeeve777
very true sir... lets see what happen..
4y
jeeve777 jeeve777
this report is very helpful for me... thanx sir
4y
Martin O'Rourke Martin O'Rourke
Just in: Nigel Farage has narrowly failed in his bid to get elected for Thanet South, losing out to a former UKIP deputy minister Mackinlay who defected to the Conservatives and took a majority of over 2,000. This will raise question marks over whether Mr. Farage will continue to lead the UKIP party having said he will resign if he fails in his bid for election.
4y
Martin O'Rourke Martin O'Rourke
Nigel Farage has officially resigned but says "he will consider over the course of the summer whether to put himself forward again" for the UKIP leadership election. He says the next chapter for the UKIP party has begun to create a "younger, more vibrant, energetic UKIP."
4y
Martin O'Rourke Martin O'Rourke
Nick Clegg has announced his resignation as leader of the Lib-Dems. He says: "It is simply heartbreaking to see...so many colleagues abruptly lose their seats because of forces beyond their control."
4y
Martin O'Rourke Martin O'Rourke
Now over to Labour leader Ed Milliband presumably at some point today.....
4y
Martin O'Rourke Martin O'Rourke
Labour leader Ed Milliband joins the list of resignees saying "I take responsibility for the result" and that he is "so sorry" for all those friends and colleagues who lost their seats.
4y
Martin O'Rourke Martin O'Rourke
With the Conservatives now having amassed 326 seats at 1145 GMT, it is confirmed that they now have a majority.

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