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Gordon Brown called off the election over the weekend, as we suspected would happen.
Predictably enough, the ‘bottler Brown’ epithets are flying around, and pundits are lining up to say that it was the Tory poll bounce that did it. But I still believe he never intended to call an election. Mr Brown wants to cling to power for as long as possible – he’d never take the risk that he might lose his turn in the PM’s seat only a few months after finally gaining it after a decade.
Mr Brown’s a control freak. He hates risk. So what he’s done here is get himself some more information on what the opposition would do if there really was an election.
And now he can steal all their best ideas…
Gordon Brown’s election feint has left him with a far better picture of how strong the Tories are, and where they would draw the battle lines in a real election. He’s noted the public’s reaction to taxes on non-doms, and the voters’ feelings about inheritance tax. So we’ll no doubt see some sort of announcement on both these things, as well as first-time buyers, in Alistair Darling’s pre-Budget Report tomorrow.
Non-doms in particular and private equity bosses should probably be worried. Mr Brown’s now been given a licence to tax them freely by the voters. And Labour’s allegations that lots of non-doms are in fact foreign nurses and low-ranking City workers will suddenly vanish into the ether now that he knows they are a cash cow just waiting to be milked.
So he’ll take a few brickbats for calling off the election. But in two or three year’s time, when he finally does go to the country, everyone will have forgotten about this little debacle, while he’ll have gained some valuable intelligence about the state of the opposition.
He’s crafty all right. Unfortunately for him though, by the time the next General Election is called, the public is likely to have finally found out what a mess he made of the economy while he was Chancellor.
House prices look highly vulnerable, with the mainstream press now full of increasingly negative stories on the outlook for property both here and for second homes abroad. The Telegraph’s weekend property supplement contained such choice quotes as “as an investment buy-to-let simply isn’t feasible anymore,” (Sarah Nixon of Nottingham estate agency Hammond Harwood); “there are too many houses and not enough buyers,” (Alan Emery of Bristol estate agent Ocean); and “we are at the end of the house price boom. Prices could grind to a halt, and falls are likely.” (economic forecaster Diana Choyleva of Lombard Street Research).
The credit crisis has kicked the debt prop out from under the UK consumer, and we’re about to find out just how much the economy has been relying on that prop since the turn of the century or so. In fact, Mr Darling’s Pre-Budget Report tomorrow is more than likely to see a downward revision of estimates for economic growth. And with the government already heavily in the red, there’s no money in the pot to fund public spending bonanzas or tax giveaways.
It’s going to be a tight couple of years – Mr Brown may well live to regret not being bolder.
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Turning to the wider markets…
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A good start on Wall Street plus strength in the mining sector helped the FTSE 100 up to a close of 6,595, a 47-point gain. Higher metals prices helped the likes of Kazakhmys, Rio Tinto and BHP Billiton top the FTSE leaderboard. For a full market report, see: London market close
Elsewhere in Europe, the Paris CAC- 40 was up 38 points, at 5,843. And the German DAX-30 was 57 points firmer, at 8,002.
Across the Atlantic, in-line jobs growth for September plus unexpected upward revisions for previous months saw stocks end the week in the blue. The S&P 500 hit an all-time high of 1,561 in intra-day trade, and ended the day with an overall gain of 14 points at 1,557. The Dow Jones was up 91 points, at 14,066. And the tech-rich Nasdaq added 46 points to close at 2,780, with strong gains for Yahoo.
In Asia, Hong Kong stocks tracked Wall Street higher earlier in the session before falling back on profit-taking. The Hang Seng was down 61 points, at 27,770 at the time of writing.
Crude oil was down to $80.79 this morning and Brent spot was at $78.91 in London.
Spot gold had edged down to $739.60 this morning and silver was at $13.34.
Turning to the forex markets, the pound was at 2.0375 against the dollar and 1.4447 against the euro. And the dollar was at 0.7088 against the euro and 117.29 against the Japanese yen.
And in London this morning, luxury home prices in London rose at their slowest pace since August 2006 last month, according to a survey by Knight Frank. Prices were up 1.2% on August 2007, and up 37% year-on-year. Weakness amongst riverside apartments on the south bank of the Thames offset stronger appreciation in neighbourhoods such as Chelsea and Belgravia.
And our recommended article for today…
Why extreme risk is becoming more common
– Mervyn King has admitted that the Bank of England doesn’t really understand the markets any more. And recent events have shown existing risk models to be wholly inadequate. For more from Niels Jensen on why shocks are becoming more common – and whether there’s any way to predict them – read: Why extreme risk is becoming more common