Mark Lister: Financial markets eye three big events this week

Theresa May's Conservative Party is hoping the UK election will give them a stronger position. Photo / AP

Mark Lister is head of private wealth research at Craigs Investment Partners.

Three big events are looming this week -- the British election, an important central bank meeting in Europe, and the testimony of former FBI director James Comey in front of the US Senate.

These all have the potential to send financial markets into a spin and knock them off their record-high perch.

They also all happen to take place on Thursday in the Northern Hemisphere, so it could make for an interesting end to the week here in New Zealand.

Polls close in the British general election on Friday morning (our time), so exit polls will emerge immediately afterwards giving the first indications of how Britain has voted. If it's a relatively clear result, the outcome should be known sometime on Friday afternoon.

At present, Theresa May's Conservatives have a rather narrow majority in Parliament, and they're hoping the voting will give them a stronger position.

If they can do that convincingly, we should see the pound rise on the back of greater certainty. If they are left with nothing better than the status quo, that would be a defeat for May and the currency will likely go lower.

The surprise scenario would be a victory for Jeremy Corbyn and the Labour Party, which would almost certainly see a negative kneejerk reaction from markets.

The latest polls have the Conservatives with only a slim lead over Labour, compared with a healthy one when the snap election was called in April. It might be close, and we all know what happened the last time markets took a major vote in the UK too lightly.

A little further east, the European Central Bank (ECB) meets in Estonia on Thursday evening, and the outcome of this will be equally interesting.

The European economy is undoubtedly improving, and political uncertainty has faded in the wake of elections in the Netherlands and France.

Things aren't quite healthy enough for the ECB to start increasing interest rates yet, but they might set the wheels in motion for a reduction in the level of stimulus they're providing.

If we do get some "taper talk" from the ECB, markets could get a bit jittery, in the same way they did when the US Federal Reserve started discussing plans to reduce its QE programme a few years back.

A third potential source of volatility could emerge from the other side of the Atlantic. Former FBI director James Comey is scheduled to testify before the Senate Intelligence Committee on Thursday morning in the US.

Markets will be watching closely for any suggestions President Donald Trump attempted to influence Comey's investigation into former national security adviser Michael Flynn.

There's every chance the Tories romp home in the UK, the ECB plays it cool, and no smoking gun emerges out of Comey's testimony. However, we could be in for an exciting Friday in our time zone across financial markets.

This column is general in nature and should not be regarded as specific investment advice.