London stocks, pound steadier after vote call triggers volatility
The pound reacted positively to Theresa Mays announcement on Tuesday and rallied strongly throughout the day to trade at its highest level against the US dollar since early October
AFP
AFP, LONDON: Londons stock market flattened yesterday following the previous sessions sharp fall that had been triggered by a rallying pound after Britain called a snap general election.
The eurozones main indices rebounded a little having also fallen heavily Tuesday, as investors look ahead to Frances tight presidential election on Sunday.
Following some turbulent trade yesterday the FTSE 100 and sterling are rather more subdued... as markets digest the potential impact of the unexpected snap election going forward, said David Cheetham, chief market analyst at XTB trading group.
The pound reacted positively to Theresa Mays announcement on Tuesday and rallied strongly throughout the day to trade at its highest level against the US dollar since early October.
With the FTSE 100 featuring many multi-nationals earning in dollars, the stronger pound sent the index closing down 2.5 percent on Tuesdaya reversal of recent months which saw sharp gains for the London stock market thanks to a slump for sterling.
The British pound literally exploded after Theresa May took the market by surprise with her general election announcement, said Naeem Aslam, chief market analyst at Think Markets UK.
It was an unexpected event and no one had this on their dashboard. After her announcement, traders are anticipating that her victory would allow for a smoother Brexit.
In company news Wednesday, shares in luxury fashion brand Burberry slumped 5.0 percent to 1,614 pence as analysts predict a possible end to the groups recent run higher.
A trading update Wednesday showed the groups sales have grown thanks in large part to tourists visiting Britain taking advantage of sterlings drop. News of a snap UK election has seen a strong rally in the pound, broker Liberum said in a note to clients. Should this continue towards polling day, Burberrys own forex-driven rally could disintegrate.
Asian markets mostly turned lower Wednesday following Tuesdays negative leads from Wall Street and Europe, with analysts saying Britains shock decision to call a snap election added to global uncertainties.
The pound held onto its gains after May announced a snap poll for June 8 as she looks to cement a mandate heading into key Brexit talks with her EU counterparts.
The move comes as France prepares for the first round of its presidential elections at the weekend, while Germany is set for a vote this year. Both could have huge implications for the future of the eurozone.
Added to this is the face-off between the US and North Korea and the cooling of relations between Washington and Moscow over the Syria crisis.
Haven assets were holding up as investors fret over the global outlook. Gold is up more than two percent since Donald Trump ordered missile strikes on a Syrian airbase earlier this month, sparking fears of a possible conflict with Russia which is backing the Damascus regime.
There is a growing wait-and-see mood due to such uncertainties as the French election and British snap poll, Okasan Online Securities chief strategist Yoshihiro Ito said in a commentary.
Elsewhere on Wednesday, oil prices rose as OPECs chief voiced confidence that production cuts agreed with crude producers outside the cartel will help to lift prices.
We are optimistic that the policy measures we have taken already place us on the path of recovery, OPEC Secretary General Mohammad Sanusi Barkindo said at an energy forum in Abu Dhabi.
