It’s now hours since the polling booths closed in the UK’s 2017 general election, and as yet there’s no clear outcome.
The Tories have lost their majority in the House of Commons, with the decision to call an early election backfiring spectacularly on British prime minister Theresa May.
There has been no landslide election as the opinion polls suggested only a few weeks ago. Instead, it’s going to be a hung parliament.
Despite that outcome, financial markets have barely responded to the news, in stark contrast to what was seen nearly a year ago when the UK electorate voted narrowly to leave the European Union.
Yes, the British pound has been smashed, but that happened hours ago.
Beyond UK assets, there’s been next to no major risk adverse reaction in other markets.
Stocks across the Asian region are trading mixed, bonds are marginally firmer (yields lower), while the Japanese yen and gold — safe havens in times of market turbulence — are actually trading lower.
Markets are all: ¯\_(ツ)_/¯
Perhaps there’s a reason for that, as Shane Oliver, head of investment strategy and chief economist at AMP Capital explains:
UK election upset – bad for UK, not much impact globally. Not helped by a bunch of mis-steps and maybe even a Brexit rethink the Tories did far worse than expected in the UK election. This puts a cloud around Theresa May and is messy for the UK economy and its Brexit negotiations and hence is a negative for the British pound and share market. However, the UK is just 2.5% of world GDP and it’s hard to see significant implications for global investment markets. Just noise – unless you are in the UK or have a big exposure there!
The UK economy isn’t as important to the global economy as it once was, and this election is not seen as vote on whether the European Union will remain intact as was the case with the Brexit vote.
As Oliver says, while UK assets and economy may see a negative impact, it’s unlikely to be felt much abroad.
And hey, it’s the weekend, and long one at that in Australia.