Heads in the sand over UK election ?

Heads in the sand over UK election ?

Frankly, it's something of a mystery as to how markets and commentators have taken such a sanguine attitude towards the UK's election in two months time. The Daily Telegraph (Business Comment, p.B2) makes the case that the strength of Sterling and of UK assets generally defies logic. It is overwhelmingly likely that the poll will result in a hung parliament, and any one of numerous combinations of parties could get together to form a coalition government. All are likely to be hamstrung and politically weak, and some will be viewed as distinctly market-unfriendly.....

ECB starts QE next week, but is it really necessary ?

The long-awaited programme of bond purchases to the tune of 60 billion euros per month starts on Monday, but the Daily Telegraph (ECB finally joins "QE Club...." ,p.B1) poses some interesting questions. Firstly, the most recent data and forecasts suggest a recovery may already have started -- perhaps even the prospect of QE was enough. Secondly, the lack of supply of suitable bonds may force yields even further into negative territory, unlike the American version of QE for example, which could rely on a seemingly inexhaustible supply of US Treasury bonds at that time. And what happens to investors if the policy works? A recovery would likely see yields rise and prices fall, leaving today's buyers staring at losses. That would be a huge irony, and a painful one ....