Markets await Lib Dem – Tory deal

CONCERNS that the UK’s political limbo could lead to panic on the markets today have been overshadowed by growing fears that the economic crisis in Greece could infect the Eurozone.

In early trading this morning, the pound rose almost a cent against the dollar on the currency markets, despite the continuing uncertainty caused by the outcome of Thursday’s General Election.

But after European leaders agreed unprecedented measures to bail out the Greek economy, sterling fell sharply against the euro.

Talks between senior Lib Dem and Conservative figures continued throughout the weekend, with another crunch meeting due this morning. Further scheduled meetings with MPs and political  activists today suggest the parties are close to a deal on forming a new government.

Conservatives in particular are eager to reach a quick agreement to settle markets concerned about political uncertainty and fears that efforts to tackle the UK deficit could be delayed or compromised.

The pound fell sharply against the dollar and the Euro on Thursday and Friday as the political crisis deepened. The FTSE fell 2.6% on Friday.

European finance ministers yesterday agreed a 500bn euro emergency loan deal that will be made available to member countries to help them ward off the impact of the Greek crisis. In addition, the International Monetary Fund will also contribute up to 250bn euros.

This is on top of the EU and IMF’s 110bn euro package for Greece which was announced on Friday.

Other markets around the world responded favourably to the Euro bail-out package.

In India’s stocks rose, starting to reverse the biggest weekly decline in six months.Tata Motors, owner of Jaguar Land Rover, rose for the first time in six days.

There was a similar trend in Australia where markets were also calmed by the announcement from Brussels. Commonwealth Bank of Australia rose as did Macquarie Group, parent of Midland Expressway – operator of the M6 Toll.