Spread-Betting Markets Show Conservatives to win 360 to 380 Seats

A few weeks ago Theresa 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 less-than-smooth election campaign, a Conservative majority is far from cut and dried according to recent polling.

“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,” says Adam Jepsen, Founder of financial spread-betting firm Financial Spreads.

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

The Financial Spreads election spread-betting markets estimate the Conservatives will win 366 - 370 seats. (Read: How spread-betting an election works).

That would give Theresa May an 80 - 90 seat majority.

This figure more or less tallies with that anticipated by Electoral Calculus and Lord Ashcroft.

According to Spreadex, the Conservatives can expect to win anywhere between 360 to 380 seats come Friday morning.

When the party’s Election Seats spread has been above 380 people have tended to sell; at its current 365-371 price, however, there has been far more positive interest in the incumbent Prime Minister.

"As for Labour, there is marginally more money buying Corbyn and co. than selling. They have found most of their Election Seats support around the 170 mark, with more sellers creeping in as the spread crossed 200," says Connor Campbell at Spreadex.

The Conservatives currently have 330 MPs so adding 30-40 seats could still be spun as giving the Prime Minister a 'big mandate' for her Brexit negations.

The Bookies and Financial Markets

Looking at the bookmakers, 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,” says Jepsen. “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%.

Indeed, some foreign exchange analysts see GBP/EUR falling below 1.10 on such an outcome.

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.