A few weeks ago Thersea May's Conservative party was the clear favourite to win the election.
At that point, we would have expected little more than a relief rally on 9 June, i.e. when the election result confirmed expectations.
However, after a bungled election campaign, a Tory majority is far from cut and dried.
That means it's more likely we'll see healthy short-term rallies for both the FTSE 100 and the pound if the Conservative party does get a majority.
The strength of the rallies will probably be proportional to the size of the majority.
Divergent predictions: polls vs markets
A number of polls are now suggesting a hung parliament is increasingly likely.
As a result, there has been a softening in the financial markets. Nevertheless the markets still seem to be backing a Conservative win.
Election spread betting markets
Our election spread betting markets estimate the Conservatives will win 366 - 370 seats.
That would give Theresa May an 80 - 90 seat majority.
The Tories currently have 330 MPs so adding 30-40 seats could still be spun as giving the Prime Minister a 'big mandate' for her Brexit negotiations.
The bookies and financial markets
Looking at the bookies, they are also backing a Conservative majority and rate the chances as:
- Conservative Majority: 75-80%
- No Overall Majority: 15-18.5%
- Labour Majority: 2-3.5%
Of course, the markets and the bookies do get it wrong.
They were caught out by the Brexit vote. They were also caught out when the US elected Donald Trump.
Big market moves expected with a hung parliament
If there's a hung parliament it's not difficult to see sterling taking a quick 3-5% hit and the FTSE 100 also dropping 2%.
Financial stocks may also see a quick 2-3% fall.
At the same time, a drop in sterling often supports the FTSE 100. That means there could be some extra volatility, i.e. as some traders sell UK stocks but other traders see the weaker pound supporting UK stocks.
24-hour trading during the election
As usual, Financial Spreads will be trading a range of markets overnight including the UK 100, GBP/USD and EUR/GBP.
UK election spread betting markets (table)
Below, our spread betting markets on the numbers of seats that the various parties get.
| Market | Sell Price | Buy Price |
| Conservative Seats | 366 | 370 |
| Labour Seats | 199 | 203 |
| SNP Seats | 45.5 | 47.5 |
| Lib Dem Seats | 11 | 12.5 |
| Other Seats | 20 | 22 |
| Green Seats | 0.75 | 1.10 |
| UKIP Seats | 0.01 | 0.3 |
| Voter Turnout | 62.2% | 62.7% |
Above, FinancialSpreads.com prices as of 8.45pm, 6 June 2017.
UK Election Spread Betting Markets (Screenshot)
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