Some parties are more jolly than others. As the politicians rush to the hustings, one party to have been acclaimed over the past two years has been taking membership of the FTSE party.

Capital values increased by 24 per cent, without even taking into account dividend income. Despite the recent stock market jitters, over one year, the FTSE managed to increase by more than 5.5 per cent. Allied to a gross yield of about 3.5 per cent, this provides an annual return of nine per cent.

Politics and investment may seem unlikely bedfellows, but certainly the two are closely linked. A Government of whichever colour dictates savings taxation and possible returns achievable.

The more detached area of interest rates and inflation are the main drivers of returns, however, and this is where the Bank of England's influence is paramount.

At the bank's Monetary Policy Committee meeting in the first week of the month, two of the nine members again voted for an increase in interest rates. The economic figures are now drifting to the conclusion that interest rates may have peaked, and it should be interesting to see if the two relent at the next meeting.

The next interest rate announcement was due to take place on Thursday, May 5, but some other event has meant that the meeting dates have had to be shifted by two working days.

What does the market want from the election? As markets do not like uncertainty, the City would prefer an absolute majority from one of the parties.

The greatest level of uncertainty would arise from a hung Parliament.

Possibly to the annoyance of the most politically devoted is the fact that the UK market will continue to take more interest in the state of the US economy and any direction offered on Wall Street.

Like it or not, the world's largest economy is still the most important factor for investment within the UK.

Some of the big boys of the FTSE, punching their weight in the US, report first-quarter figures this week. Much controversy is made of BP's large level of profit, and the group is unlikely to disappoint today. Some of the political parties have proposed a windfall tax on oil companies, but as BP would happily point out; they already pay plenty in tax, thank you very much.

The market will also hope to have an update on any Russian tax liabilities, through its link-up with TNK. BP is arguing that the back-tax relates to before they came on board in 2003, and specifically to TNK's subsidiary, Tyumen Oil Co.

Also reporting first-quarter results, this time on Friday, are pharmaceutical companies GlaxoSmithKline and AstraZeneca. Both companies' shares are widely held throughout the region, thanks to the Barnard Castle plant and ICI's presence respectively.

P&O also reports results on Friday. The temptation to board a ferry and get away from next week's shenanigans must be very tempting.

Last Thursday saw one of the largest one-day rises on the Dow Jones Index in the US. This managed to reverse the sharp drop seen in the week before. Company results continue to surprise on the upside, and the same is happening in the UK.

Valuations are being driven by these good figures, providing a positive framework for the rest of the year, whatever party is supported.

Anthony Platts

Anthony Platts is an assistant director in the Teesside office of Wise Speke, and can be contacted on (01642) 608855.

Views expressed are the author's own and are not necessarily held throughout the Brewin Dolphin Group. Wise Speke is a division of Brewin Dolphin Securities Ltd, a member of the London Stock Exchange, authorised & regulated by the Financial Services Authority.

Prices, values or income may fall against investors' interests. You should therefore be aware that you may get less back than you invested. Investments may not always be suitable for all individuals. If you have any doubts, you should consult a professional advisor.

Published: 26/04/2005