Three risks to FTSE 100 on election day

It's election day in the UK, and things might not be as tight as the City feared, according to latest polls. But there's more to this market than the public vote, and events both in Europe and the US could have a significant impact on share prices over the next few days.

Remember two years ago when Ed Milliband was tipped to give David Cameron a run for his money? He didn't, and, after recent optimism in Left-wing circles, Jeremy Corbyn looks like suffering the same fate.

YouGov polls, which had predicted a hung parliament, now put the Conservatives on 42% of the vote, seven points ahead of Labour on 35%. That would give Theresa May a majority of almost 50 seats, up from 17 currently.

Elsewhere, at the extremes, a final Survation poll puts the Tories just 1% ahead at 41%, while ICM calls it 46%-34% for the Conservatives, and a ComRes poll for The Independent 44%-34%.

Remember, the Tories need around 316 seats to secure an overall majority.

A stronger pound whacked the FTSE 100 yesterday, although a slight pullback in sterling Thursday has restored some calm. A win today for the 'business-friendly' Tory Party would add certainty, reviving demand for equities short-term.

However, Brexit negotiations begin in less than two weeks (19 June), and there's nothing like a €100 billion (£84 billion) "divorce bill" for leaving the European Union to sharpen the mind.

Staying in Europe, the European Central Bank (ECB) holds its monthly meeting at lunchtime, and this is perhaps the most keenly awaited for some time.

Consensus appears to be that, despite the soft May flash inflation print, the ECB will make a step towards monetary policy normalisation, although ECB president Mario Draghi will be keen not to appear overly hawkish, and there are reports the ECB may cut its inflation forecast Thursday. We'll find out at the press conference at 1330BST.

Still, UBS expects policymakers to acknowledge that "the risks to the economic outlook might now be balanced". It'll drop its interest rate easing bias, too, although ending Quantitative Easing (QE) may have to wait another month. We know rates won't go up until QE's over.

Most likely, the biggest potential banana skin, however, is 3,500 miles away in Washington DC. There, we'll hear former FBI director James Comey's testimony to the Senate Intelligence Committee.

On what Panmure Gordon's chief economist Simon French is calling 'Triple risk Thursday', he thinks this has "the largest surprise possibility…with the UK election and ECB expected to reinforce the status quo".

That said, we've already seen the prepared remarks and Deutsche Bank strategist Jim Reid reckons "it failed to contain a smoking gun and markets mostly ended up ignoring it".

So, it may be that none of these three events provides a shock, and that those investors revealed by our election poll, published yesterday, to be sitting on the sidelines, will return to the market with new money.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.