Sanguine markets must look again at Labour

The challenge for the financial markets during the six-week slog to polling day may be to stay awake as much as anything else. A Labour victory has been so heavily discounted and the phoney election campaign has been running for so long that it will take more than the spice of John vs Tony, live and in debate, to prevent eyelids closing on the dealing desks.

Nevertheless, Mr Major has clearly determined that the long haul - 45 days at the hustings, the longest election campaign this century - is the best route to staying in power. That's time enough to expose Labour's financial illiteracy and fiscal irresponsibility while allowing a steady flow of good economic news to filter through.

The initial reaction from the markets might suggest that his strategy has got off to a good start - the pound down against the Deutschmark and dollar, gilts off half a point and the Footsie tumbling by more than 50 points as the prospect of Tony Blair's first cabinet looms large. Like most knee jerk reactions, however, this one may well prove wrong.

Adjusting for the number of stocks going ex-dividend, the response from the equity markets to the naming of election day was less marked than that from the foreign exchanges. In the event that Labour does form the next government, it ought to be the other way around.

Gordon Brown has banged on for so long about fiscal rectitude, balanced budgets, low inflation and the need to cost every spending pledge, that it is difficult to get a cigarette paper in between the two main parties on macro-economic policy. If an incoming Labour government does find itself confronted with a sterling crisis, it is more likely to be about how to control sterling's rise than prevent it from falling through the floor.

The outlook for the corporate sector is much less promising. Labour's pledge not to raise either the basic or high rates of tax looks ominous. The obvious target now that these this avenue has been closed off must be companies, since neither companies nor the pension funds that provide their capital possess votes.

So far the only tax-raising pledge is the windfall levy on the privatised utilities. But will a Labour government be able to resist fiddling with corporation tax? And will a Labour government be able to resist further restricting, perhaps even abolishing the tax credits that exempt funds enjoy on dividends?

If the latter were to happen then it would take a 10 per cent correction on the equity markets to maintain current yields. The markets are perhaps being more sanguine about the prospect of a Labour win than they ought to be.

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Life and Style
Couples have been having sex less in 2014, according to a new survey
New Articles
i100... with this review
Holly's review of Peterborough's Pizza Express quickly went viral on social media
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Blahnik says: 'I think I understand the English more than they do themselves'
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam