UK poll result could mean Brexit. Watch the British business (especially financial) sector start fretting, the UK pound start selling off, and shares weakening if it looks as though the Conservatives, led by David Cameron, will dominate the new government, as exit polls are suggesting. Cameron has promised a referendum on Britain leaving the EU, and the stronger-than-expected support for the party indicates solid support from UK middle classes. At the same time, the chances of Scotland exiting the UK have once again risen with the Scottish National Party dominating the election result north of the border. Suddenly, Britain could start looking as vulnerable and weak as Greece or Italy. A Conservative government will be under pressure to hold a referendum on the EU sooner rather than later (Cameron will try and delay it as long as possible). HSBC bank is looking to leave the UK and relocate back to Hong Kong because of rising taxes and bank bashing. Another big international bank, Standard Chartered, is thinking along the same lines. The National Australia Bank revealed this week it was moving to leave the US (for slightly different reasons, but the new high bank tax was an unspoken reason). If HSBC and Standard Chartered leave it will slash jobs in the financial sector and in London, reduce the relevance of the city and the country generally in finance, and encourage other companies to look at departing, especially if the referendum on the EU is held and approved. Watch Japanese car companies lead the way, and for Scotland-based banks and insurers to move south at the same time. Turmoil, uncertainty and some febrile years lie ahead for Britain (no longer Great?). — Glenn Dyer

The fat, profitable ASX. The ASX lost $40 billion in value in Wednesday’s big sell-off, and a few billion more in yesterday’s drop of 0.8%, but the ASX made out like the legal bandit it is. In fact, nothing can match the ASX for profitability. Not the big four banks, not Apple, not the iron ore operations of BHP Billiton and Rio Tinto (even at these low prices for iron ore). No wonder there are many complaints about its fees and charges. And don’t take my word for it; look at the nine-month trading statement the ASX Ltd released yesterday. Revenue up $28 million in the nine months to March 31 to $516.8 million, from $488.4 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) up to $396.6 million, from $373.4 million. Profit margin (EBITDA over revenue) a fat and juicy 76.7% in the period to March this year, from 76.4% a year ago. Those are fat profit margins, protected by the federal government. The ASX is just one of the larger fish feeding on the tens of billions of dollars a year in fees and charges extracted by the private sector (and government) from the superannuation system. No wonder most people won’t have enough to retire on. — Glenn Dyer

US job watch looms tonight. The big market sell-off in shares and bonds eased overnight ahead of the US April jobs report tonight. Government bond yields settled down, the US dollar rose, oil fell sharply and Wall Street rose. Tonight’s jobs report is suddenly more important than ever, and a lot of very worried people around the world in markets, banks, brokers, among investors and especially in central banks and governments want a good-to-very-good report to be revealed at 10.30pm Sydney time. A good report would be more than 200,000 new jobs created last month — very good would be upwards of 240,000 or more, and the jobless rate falling to 5%.

A report showing fewer than 200,000 new jobs would bring markets up short, but a report showing around 100,000 to 120,000 could trigger more selling in bonds and shares — at a pace we have seen off and on in the past three days or so, especially in bonds, which are now in a major correction from the overbought condition they got to in early April, when the yield on the key German 10-year security tumbled to just 0.05%, and yields in numerous other countries (Sweden, Denmark, Switzerland) went negative. The best bet is a surprise on the upside after the surprise on the downside in March, and speculation returning about the timing of the Fed’s rate rise. Situation normal, sort of. But the headlong rush towards negative territory and deflation in the eurozone looks like its over for the time being, unless oil drops sharply (which remains very possible, especially if Iran starts pumping more oil). — Glenn Dyer

Greek defiance. Greece is heading for direct confrontation with the rest of the eurozone after refusing to cut pensions or ease job cuts to meet demands from creditors for convincing reforms ahead of any new financial deal. In fact, the Greek Parliament this week passed a law to rehire sacked public servants and to restore benefits cut in previous reforms. The defiance has ended hopes for a deal, or at least the outline of a deal at next Monday night’s meeting of eurozone finance ministers. A Greek government spokesman said the rest of the eurozone and the IMF (which received a 200 million euro payment from Greece on Wednesday) had to make concessions — an example of the continuing arrogance of the Greek government and many of its supporters. Negotiations with the eurozone have moved so slowly that the lenders have ruled out an agreement at next Monday’s meeting with finance minister Yaris Varoufakis. But the Greeks want the eurozone to agree to a draft deal so as to allow the European Central Bank to allow the Greek government to sell more short-term debt to its banks. The ECB this week refused to tighten the rules on lending to Greek banks, but it also refused to ease its tight controls. — Glenn Dyer

Peter Fray

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