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Pound surges, FTSE slumps as May seeks general election

Pound surges, FTSE slumps as May seeks general election

by Daniel Grote Apr 18, 2017 at 11:06

Update: The pound has surged after prime minister Theresa May called for a snap general election, sending the FTSE 100 further into the red.

May called for a general election on 8 June, saying it was the only way to 'guarantee certainty and stability for the years ahead is to hold this election and seek your support for the decisions I must take'.

After a sharp sell-off ahead of May's announcement, the pound reversed course, surging to $1.265 against the dollar, from a low of $1.252 ahead of may's statement.

That heaped further pressure on the FTSE 100, already weighed down by bearish sentiment sparked by rising geopolitical tensions.

The UK blue-chip index was trading 119 points, or 1.6%, lower at 7,210 points. A stronger pound tends to hamper the index, whose members rely on overseas markets for around three-quarters of their revenues.

‘The pound was the big winner from news that a UK general election is in the pipeline, as currency markets bet on the current government winning a greater majority,' said Laith Khalaf, senior analyst at wealth manager Hargreaves Lansdown.

'Markets can get a case of the jitters in the run up to elections, but this one may be different seeing as it comes in the wake of the Brexit vote, and the polls suggest the incumbent government is likely to remain in power and gain more seats,' he added.

'Markets do not like uncertainty,' said Adrian Lowcock, investment director at Architas. 'The market has begun to price this in and there is likely to be an "uncertainty discount" on the UK stock market until the election result is known.'

Luke Batholomew, investment manager at Aberdeen Asset management, said it would 'take investors some time to digest the effects of the election in the next few days'.

'A big factor for them is whether the election will make a softer stance on the Brexit negotiations more likely,' he said.

'The election should hand Theresa May a much bigger mandate to stand up to the harder line, anti-European Union backbenchers who currently hold a disproportionate sway over her part's stance on Brexit. That would be welcomed by financial markets.'

Almost every single FTSE 100 stock was in the red in a broad-based sell-off. Miners were the worst hit, amid record steel production and rising iron ore stockpiles in China. Fallers included:

  • Anglo American (AAL) -3.7% at £11.27;
  • BHP Billiton (BLT) -3.9% at £12.20;
  • Antofagasta (ANTO) -3% at 809.9p;
  • Glencore (GLEN) -3.8% at 297.5p;
  • Rio Tinto (RIO) -2.8% at £30.34.

Oil stocks were also in the red, as the price of Brent crude fell from last week's highs, down 0.4% at $55.12 on an expected surge in US shale output. Shell (RDSb) was down 2.3% at £21.42 while BP (BP) fell 3.2% to 456p.

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Comments  (21)

  • Norman E: 

    If Labour and the LibDems get together and do a deal, with the LibDems withdrawing candidates from constituencies where their voters can help Labour retain the seat, and Labour withdraw from Conservative held constituencies where there was a remain majority at the referendum and the LibDems have a chance, they could well engineer a Labour LibDem coalition with the SNP bought off with a referendum.

    Opinion polls are all very well, but its constituency to constituency voting that matters, and Labout have decent majorities in many of their 229 seats, and are unlikely to lose very many, whilst the Lib Dems could be big winners at the Conservatives expense. Expect the LibDems to promise another Brexit referendum, and Labour to support that if they have the sense to do a deal as I suggest.

    16:25 on 18 April 2017

  • Anonymous 1: 

    I do not trust Mrs May so I shall be voting UKIP.

    16:52 on 18 April 2017

  • Norman E: 

    Voting UKIP is fine if Labour hold the seat, but in some Conservative held seats UKIP votes could just let in the LibDems, and you know what they want.

    17:50 on 18 April 2017

  • Anthony Tinslay: 

    Although different last time, for this coming election a UKIP vote is a truly wasted vote. The basic tenet of UKIp is to get out of Europe and the only party offeiung the chance of that is the Conservatives. If the other parties actually try to stitch up a complicated system as suggested they might by Norman then all credibility in parliament will be lost for a long time. A rather unlikely scenario I suggest.. Apart from a larger conservative majority the election will also give confirmation of Corbyn's real .posiion in the political world.

    17:52 on 18 April 2017

  • Anonymous 2: 

    Norman E - this would involve all said parties walking away from any semblance of political principal and make a mockery of democratic process (well the LibDems are already giving up on democratic process...). They may all be a self-serving bunch, but I struggle to believe this is anything except fantasy. I believe most voters will see through that - it should be clear now that voters know when they are being made fools of for some idealogues' wet dream... and hand a resounding victory to May.

    17:59 on 18 April 2017

  • Peter B: 

    Norman E: another possibility is a hung parliament, which at the moment has a 20% chance according to 'City sources' - though an increased Tory majority must be the clear favourite. May is a poor performer in debate, especially the TV variety - and she makes exceptionally dull and boring speeches. However, she is matched in these abilities by Corbyn. A definite opportunity for a 3rd party? Who will Putin favour?

    18:02 on 18 April 2017

  • gravedigger: 

    One important factor will be if the electorate in Scotland start to recognise that the SNP cannot run a health service, never mind a country. Just how long Sturgeon can hide behind slogans and populist nonsense will be a defining factor in both the election and the future of the union. Some pullback from the near monopoly of the SNP in Scottish constituencies would defuse calls for Indyref2 and deprive La Sturgeon of her self-appointed role as roving ambassador.

    18:19 on 18 April 2017

  • Cynical Investor2: 

    Whilst there is a Political mix in Westminster which makes no secret of intention to Frustrate Brexit Negotiations, the UK will have difficulty achieving a Good Deal. The EU Elite will exploit our perceived Political weakness.

    Theresa May is to be applauded in having the Guts to call an Election.

    19:50 on 18 April 2017

  • Martyn: 

    Norman E

    To get down to the facts of your suggestion the first person who should then give up his seat would be Mr Clegg in Sheffield for the benefit of Labour. Now that just won't happen!

    22:07 on 18 April 2017

  • Norman E: 

    Politics is a cynical business. Its bible is The Prince. Sometimes you defeat one enemy by an alliance with another enemy.

    22:10 on 18 April 2017

  • mc2: 

    big mistake by may in calling this election... the greatest majority of young people who are very angry at missing voting the last election will vote corbyn in. Remember how everybody said at the time Corbyn had no chance to ever become labour leader?... If corbyn promises another referendum he is in. If he keeps aping the tories he will lose

    22:25 on 18 April 2017

  • Norman Englender: 

    Who is Norman E?... it's not me and just using the initial of the surname is confusing....and unfair

    22:28 on 18 April 2017

  • albion: 

    I think Norman E hasn't realised that in England and Wales the majority voted out so any kind of tactical manipulation attempt won't go down well and probably lead to more voting Tory.

    22:58 on 18 April 2017

  • BILLFISH: 

    Jees----- they will go to any lengths to keep Fred the Shred of the front pages it seems.

    02:31 on 19 April 2017

  • Norman E: 

    I have realised what Albion says, but the issue is that even a small minority with a grudge can swing elections, and there is quite a large minority of remainers who can do serious damage.

    Lets face it, the only way that May can lose this election is if she fails to take a lot of the Labour marginals, and the LibDems regain the seats they lost in 2015, and take some Conservative marginals of which there are more that are vulnerable to the Lib Dems than to anyone else. What May has done is given the rotting corpse of the LibDem party the opportunity to rise Lazerus like from the grave, by promising to derail Brexit with another referendum.

    As for Labour, they may be less vulnerable in marginal constituencies than many people think. There seems to be an irreduceable hardcore of Labour supporters who would vote for a dead dog wrapped in a red flag, and that plus returning Labour voters who chose UKIP last time round can save them.

    Labour clearly cannot win outright, but if they hold on to enough of their current seats, and the LibDems make significant gains then a Labour-LibDem-SNP alliance to keep the Conservatives out of power is a real possibility. THe country will pay a heavy price for that. The LibDems and SNP will demand two referendums, on the EU and on Scottish Independance, and in return will give Labour unlimited licence to borrow, raise taxes and spend spend spend..

    09:25 on 19 April 2017

  • mc2: 

    NORMAN E is only partly right... the strength of corbyn is in all the new young voters.... that's got nothing to do with red flag at all.... these voters never heard of red october revolution, they just want someone different from the others and whether you like him or not corbyn is the only party leader who does not come across as a leader and still is there leading his party. If he promises a new brexit referendum in his manifesto he is in without problems

    09:43 on 19 April 2017

  • Cynical Investor2: 

    Just imagine Jeremy Corbyn sitting with Donald Tusk and Co, negotiating the UK's continuing relationship with the EU!!!

    Stay liquid and get Off-Shore as quickly as possible.

    09:52 on 19 April 2017

  • Norman E: 

    Corbyn is never going to get an overall majority, he would have to be in coalition with the LibDems and probably the SNP as well. The only thing they would be negotiating would be terms of utter humiliation to re-join the EU, after which the EU would treat the UK as a leper, excluded from decision making and forced to pay up in full with no budget rebate. France would probably demand and get what little is left of our fisheries.

    13:52 on 19 April 2017

  • mc2: 

    Norman E... I don't agree... if uk remains in eu she would not have any worse treatment/regulation she already has and conform to all other eu countries... Fisheries would be and should be under eu regulation if uk remains... unless uk treats fisheries like the pound and insists in monopolizing them.... uk is already greatly privileged in eu. eu should demand uk to give up the pound if they wish to remain but I expect eurocrats are too gutless to enforce that

    14:48 on 19 April 2017

  • Norman E: 

    I don't think its a case of remaining in the EU. Triggering Article 50 has started a process which will result in the UK leaving at the end of March 2019, and if we applied to re-join even before that process has ended there are several other countries including France that would want to extract the maximum price from us.

    15:33 on 19 April 2017

  • Cynical Investor2: 

    mc2, suggest you go to Cornwall and repeat the Fisheries thinking in Newlyn, you may need a Fisheries Patrol Vessel for protection!

    15:55 on 19 April 2017

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