LONDON, June 5 (Reuters) - For financial markets usually

biased toward legislative gridlock over untrammelled government,

this election-packed month so far has seen a wild ride around

voting landslides and 'super majorities'.

What's clear from Mexico and India - and possibly

instructive for U.S. and British elections ahead - is not all

big majorities are treated equally, not all are necessarily

negative for investors and they can deliver seismic price moves.

And if you were minded to think that politics doesn't matter

much to markets, think again.

This weekend's election results initially threw up two big

surprises for markets - not who won the votes in Mexico and

India, but the scale of their victories.

Claudia Sheinbaum's storming win in Mexico presidential poll

was a shockwave to markets mainly because of the near two-thirds

parliamentary majority for her left-wing Morena party that could

allow it to govern, spend and change the constitution virtually

unopposed.

Markets balked at the prospect, sending a super-strong peso

into a tailspin of almost 5% and knocking back Mexico's

stock market by more than 6% on Monday. Some soothing

noises from Sheinbaum and Mexico's finance minister on fiscal

restraint have since calmed investor horses, and the initial

reaction was perhaps what you would traditionally expect.

But in a stark contrast, India's rupee climbed and

stock markets surged to record highs after weekend exit

polls suggested Narendra Modi's BJP-led alliance would be

re-elected and could secure a 'super majority' there.

Within 24 hours, as official results showed Modi's win was

far short of that, there was a violent market reversal that saw

stocks recoil by about 6% and the biggest one-day withdrawal of

foreign institutional money on record.

Such polar opposite treatments of two potential landslides

was remarkable.

Reasons cited are rooted in the politics of the respective

governments, domestic legal and constitutional sensitivities,

market positioning and relative exposure to foreign investment.

But what's not in doubt is how the dalliance with unfettered

government has seen volatility levels surge.

Implied volatility in the Mexican peso over the

month ahead, for example, soared back above 16% to its highest

since March 2023 and more than twice levels seen two months ago.

More tightly controlled by its central bank, India's rupee

was calmer. But 10-day realised stock market volatility has just

jumped to its highest since the pandemic hit in 2020.

And the spike in volatility in both countries, if it were to

persist, could well be the biggest negative to overseas

investors.

SUPER CHARGE

Investors' seeming preference for legislative stasis and

split governments is often cited as a given - based on mix of

fears about excessive regulation, tax and government oversight

along with skepticism about the effect of free-spending on

public debt and inflation and crowding out the private sector.

But, much like this week's examples, it's not always so

clear how that will play out in practice.

In the major western economies going to the polls later this

year, super majorities don't exist in quite the same way.

But there are equivalent outcomes that could unshackle

winning parties.

Britain's snap election, scheduled for July 4, is throwing

up some eye-popping estimates from incoming opinion polls.

Although the opposition Labour Party is almost certain to

take power for the first time in 14 years on an uncontroversial

manifesto, recent polling suggests it could secure a monster 194

seat parliamentary majority - its biggest ever, a larger win

than former prime minister Tony Blair secured in 1997 and more

than twice the current government's 80 seat margin.

Labour has been favourite in betting markets all year - and

that seems not to bother financial markets that have pushed the

pound to its highest since 2016 and FTSE 100 blue chips

to record levels.

But it's a reasonable question about whether a majority of

the scale suggested by the latest polls would tempt Labour into

bolder moves over the next five years and at least lift UK

policy uncertainty to some degree.

As to arguably the most globally influential elections of

the year for the U.S. White House and Congress, the razor thin

margins of difference projected in races for the President,

House and Senate suggest the issue of super majorities is far

from mind.

And yet precisely because all those margins are thin, the

equivalent legislative green light of one party getting a clean

sweep of all three houses is not inconceivable - even if not the

best guess five months from polling day.

Would gridlock-loving markets become restive at the prospect

of two-years of one party dominance?

Fund managers and strategists certainly always say they

would.

But effective clean sweeps for the Republicans in 2016 and

Democrats in 2020 didn't really turn out so terrible for anyone

holding the dollar and Wall Street stocks. The

S&P500 gained more than 20% and 30% respectively in the

12 months after both those elections and the dollar lost just 4%

and 1% over the same periods.

Where gridlock matters most, however, is in the bond market

- and 10-year Treasury yields were indeed higher in the first

year after both 2016 and 2020 polls.

And yet, gridlock now likely stymies any form of

badly-needed U.S. fiscal consolidation for the next couple of

years - so even that's no longer the panacea markets make it out

to be.

Big election wins may involve big market moves - but the

direction of those moves is far less obvious.

The opinions expressed here are those of the author, a columnist

for Reuters.

(Editing by William Maclean)