Market concerned over 'hung parliament' say Nomura

"In the United Kingdom, opinion polls have narrowed slightly raising market concerns about a possible 'hung parliament' resulting from a general election" said Alastair Newton of Nomura.

"However, we remain of the view that a stable Conservative majority is the most probable election outcome" he added, expecting the market to rally shortly after.

The concern over the future of UK's politics is affecting a number of equity and currency markets.

The spreads for futures after a June election are higher than for March. It now looks likely the market could rally depending on the General Election.

The English pound meanwhile is currently more sensitive to comments from the Monetary Policy Committee regarding interest rates, which is making policy also dependant on fiscal deficit and outcome of the General Election.

Meanwhile in USA, concerns remain over Obama's popularity with regards to fiscal stimulus and jobs.

A November Mid-Terms could give the Republicans a foothold in the House with the Democrats losing majority.

The current instability in economic recovery has left the Democrats with narrowing options on which to pursue popular proposals and therefore regulatory reform for the financial sector appears likely, making the market there more risk averse:

"Doubts over the strength of the economic recovery as exit strategies from the response to the financial crisis come closer, coupled with concerns over a possible Euro Area default, have driven a sharp uptick in risk aversion since end-January" said Alistair Newton.