Anticipation of Super Thursday shifts market into neutral

On Wall Street they’re calling it Super Thursday and it has frozen financial markets in their tracks.

On Thursday, June 8, the United Kingdom holds an election that has become surprisingly close. Prime Minister Theresa May looked set to cruise to a victory that would increase the majority that her Conservative party held in Parliament. May had run on the idea that only her government had the strength and stability to strike a favorable Brexit deal with the European Union. But a series of mis-steps on her part has turned the race competitive. And since the financial markets loath the Labor Party and (especially)  its leader Jeremy Corbyn, anything that indicates that May and the conservatives might lose their majority in the House of Commons on Thursday sends the pound and London stocks lower.

Back on this side of the pond, Thursday brings Senate testimony from fired FBI Director James Comey. Comey probably won’t go so far as to directly accuse President Donald Trump of obstruction of justice, but his account of the FBI’s investigation into possible collusion between the Trump campaign and the Russian government certainly won’t help the White House regain control of the legislative agenda in Washington. The fear in the financial markets is that the testimony will be damaging enough to prevent the Republicans, who control both houses of Congress and the White House from passing a tax cut, infrastructure stimulus, or a replacement for Obamacare into law.

And finally, on the Continent, the European Central Bank meets on Thursday. The likelihood is that  bank won’t do anything to change its current policy of asset purchases. But financial markets will be parsing central bank president Mario Draghi’s post-meeting remarks for clues as to when the bank might start reducing its monthly purchases and how quickly it will wind down the program. The parameters of that decision will have a big effect on the euro, the U.S. dollar, and the timing of further interest rate increases from the U.S. Federal Reserve.

So you can see why the Standard & Poor’s 500 stock index hasn’t gone much of anywhere today. As of 3 p.m. New York time the index was down 0.05%. Gold, in contrast, has moved to near a 7-month high at $1295.63 an ounce, a gain of 1.01% on the day.