British Markets Riding Election Roller Coaster

For dealers in Britain’s financial markets, trading while the nation is in an election campaign has become much like riding a roller coaster, with prices falling and rising along with the latest public opinion polls on how well Prime Minister Margaret Thatcher is doing.

Staying aboard has required nerves of steel.

“Dealers are in an intensely nervous state and look like staying in an intensely nervous state until election day,” said Ian Harwood of the Warburg Securities brokerage.

Polling is on Thursday, with brokers in no doubt who they support--Thatcher’s Conservative Party.

Despite assurances from the left-wing Labor Party, they believe that victory by the opposition party would lead to renewed inflation, a flight of foreign capital, a crisis for the British pound and more government control over the financial markets.

Stock prices surge every time a public opinion poll suggests a comfortable Thatcher win. In a poll-crazed country, there is at least one new survey and frequently two or three each day.

Every time they show Labor gaining ground, prices slump. The stock market can lose billions of pounds in minutes.

“When I went out for lunch Tuesday, the FTSE (100-share) index was 20 points up at a record level. When I got back, it had lost 30 points,” Harwood told Reuters.

During his break, he explained, rumors swept through the market that a poll of key marginal seats had pointed to the possibility that Thatcher might not win an overall majority in Parliament.

The biggest swing came Thursday, after a rumor said a poll due out Friday would show only a two-point lead for Thatcher. The rumor sent the stock market into a tailspin, although prices recovered somewhat after the polling service said it did not even know what the results would be.

That day, the FTSE 100 index closed down 21.2 points at 2,214.2.

The Labor Party has called for an investigation.

Its foreign affairs spokesman, George Foulkes, alleged that some investors were trying to profit from false reports.

Many market dealers said privately that they believed the rumor was started deliberately.

Robert Worcester, chairman of pollsters Market Opinion Research International, said: “The market is being manipulated unethically. It’s the unacceptable face of capitalism.”

But stock exchange spokeswoman Anne Coleman said the exchange regarded an probe both as unnecessary and impractical.

“Rumors are what make all markets move, and how on earth do you investigate a rumor?” she said.

The tension has spread to foreign exchange and bond markets. “It’s very vulnerable to rumors. I can’t stress enough how nervous it is,” a dealer in government bonds said.

At one point last week, the pound suddenly gained 2.5 cents on a rumor that a poll showed Thatcher with a commanding lead of 15 percentage points.

“We had to send someone for a paper before we found it wasn’t true,” said Rob Jacques, chief dealer at Midland Bank.

“It is lunacy. One opinion poll, even a rumor, can destroy the entire bullish sentiment in the market,” he said.