Get all your news in one place.
100's of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

FTSE 100 sheds its 2017 gains and pound weakens as poll fever grips markets - as it happened

The financial district of Canary Wharf in London.
The financial district of Canary Wharf in London. Photograph: Ben Stansall/AFP/Getty Images

British businesses have lived through some turbulent times recently (like the rest of us....).

So a snap election probably won’t cause as much disruption as the shock EU referendum vote.

So argues Edmund Parker, partner at legal firm Mayer Brown:

“Brexit brought about a significant pause in deal making. However, yesterday’s announcement of a snap election seems less likely to have the same impact on deals and financial activity, as many of the polls believe May will boost her majority, and this will give her a stronger hand in Brexit negotiations, with fewer factions to please.”

“However, we’re living in uncertain times and if anything changes between now and the 8 June, we still may see a slowdown in activity. The starting gun has only just been fired. Ultimately, uncertainty is becoming the new normal and the markets are just getting on with it. To a large degree, this latest round of ‘uncertainty’ is just a different shade of the same.”

Pound dips in late trading

The pound is coming under some late pressure tonight.

After a steady day, sterling is now down almost half a cent against the US dollar at $1.2795, having hit a six-month high last night.

The pound against the US dollar this week
The pound against the US dollar this week Photograph: Thomson Reuters

After initially hailing Theresa May’s push for a snap election, some in the City are now pondering exactly how the campaign will play out.

Michael Hewson of CMC Markets says many traders are still cautious about the pound’s prospects.

The market still remains in a negative mindset for sterling with short positions still elevated.

Some investors may also be wondering whether the Conservatives are really nailed on for a landslide, as opinion polls suggest.

Richard Benson of currency fund Millennium Global explains (via Reuters):.

“It isn’t quite the one-way street that a lot of people have painted over the last 20 hours.

With a 20-point lead off the starting blocs, I would have thought the risk is more that it will narrow than grow. A positive surprise from the French election would also presumably see a squeeze higher in the euro after the weekend.”

Updated

FTSE closes in the red amid election jitters

BREAKING! Edginess over the UK snap general election has sent the FTSE 100 index deeper into the red, wiping out all its gains so far this year.

The blue-chip index has just closed for the night, down 33 points at 7114 points.

That adds to the 180 points lost yesterday, which wiped £46bn off the index (we’ve lost another £8bn today).

This takes the FTSE 100 down to an 11-week low, and means the index is now lower than on 1st January 2017.

The FTSE 100 during 2017
The FTSE 100 during 2017 Photograph: Thomson Reuters

Fashion firm Burberry was the big faller, down almost 8%, after it warned of uncertain trading conditions and falling sales in the US this morning. Energy companies also lost ground.

Joshua Mahony, market analyst at IG, blames “ongoing political uncertainty” for spurring investors to sell shares.

The FTSE has suffered a somewhat disappointing end to Wednesday’s trade, as early gains were eroded in the wake of the vote to dissolve parliament ahead of a snap General Election in seven weeks’ time.

After yesterday’s dramatic crash for the FTSE, today has been more about stability as traders seek to ascertain whether such a dramatic selloff is really justified ahead of what looks likely to be a landslide for the Conservatives.

However, the FTSE 250 index (which is arguably a better measure of the UK economy) has closed higher. It gained 119 points to 19,417, up 0.6%, taking it closer to the record high hit last Thursday.

Here’s another chart showing how the FTSE 250 has caught up with the FTSE 100, after suffering much heavier losses immediately after the EU referendum:

Back in parliament Sajid Javid, the secretary of state for Communities and Local Government, has been answering questions about Britain’s housing problem.

My colleague Julia Kollewe has the key points:

Sophie Barnes of Inside Housing also tweeted from the session:

Bloomberg has spotted that the FTSE 250 index of medium-sized companies has been outperforming the larger FTSE 100 for several weeks, and by more than ever before.

The white line on this chart shows how the gap between the two indices has risen (a higher number means the 250 has extended its lead).

That’s partly because the massive companies on the FTSE 100 are vulnerable to sterling (as they earn money overseas). Mining companies have also been hurt by volatile commodity prices.

Are investors being too complacent over the UK election?

There’s a general feeling in the City that Theresa May will get a larger majority on June 8, and this will strengthen her hand in the battles ahead with Brussels.

That’s why the pound jumped so high yesterday, and had held those gains today.

But.... just packing the House of Commons with more Tory MPs won’t make the Brexit talks a breeze, when it comes down to the cost of leaving the EU, and the details of a trade deal.

FXTM research analyst Lukman Otunuga suspects that the pound could have rebounded too far, given the uncertainty.

He says:

Questions should be raised over the sustainability of the current Sterling rally, especially when considering how political uncertainties and Brexit woes remain current. Investors are still pondering over the economic future of the United Kingdom after Brexit, with questions still being raised about whether the two-year timeframe will be enough to secure a deal. Although the European Union has stated that they will not punish Britain during negotiations, the thought of the EU making an example out of Britain to prevent others from leaving the bloc does linger in the background.

Fawad Razaqzada, market analyst at Forex.com, also spies problems ahead:

Evidently, investors are hopeful that the UK Prime Minister will have a stronger mandate to secure the UK’s EU exit from the EU as she will be able to push back hard deadlines for a trade deal until the next election in 2022, assuming she wins this one. But that is the hope, in reality things might turn out differently, as US investors are starting to find out with regards to Donald Trump. Clearly, Brexit-related uncertainty will remain in place for a while yet.

Updated

Parliament votes in favour of early general election

It’s official! Britain is heading back to the ballot box in June.

522 MPs have voted in favour of a snap general election, comfortably more than was needed.

But 13 MPs voted against, which means there were around 100 abstentions.

Our Politics Live blog has full details:

There’s not immediate market reaction -- obviously it would have been a shock if MPs had voted the other way.

Updated

Over in parliament, MPs are now voting on whether to hold a general election on June 8th.

Theresa May needs a two-thirds majority, under the Fixed Term Parliament Act - which should be a breeze as most opposition MPs have said they’ll support the PM’s plan.

Updated

IMF warns on Brexit uncertainty

Pedestrians walk past a mural announcing the upcoming International Monetary Fund and World Bank Spring Meetings on the IMF headquarters on April 14, 2017 in Washington, DC.

Just in: The International Monetary Fund has warned that the global economy could be threatened by Brexit uncertainty.

In its new Global Financial Stability Report, the IMF flags up that the financial system could be weakened if banks are forced to leave the City, to maintain full access to the EU.

The fund says:

“Uncertainty about the negotiation outcome is pushing banks to anticipate Brexit-related costs.

Banks have started preparing for a worst-case scenario, in which no agreement is reached, to avoid any possible disruption to their services. Duplication of some activities and business structures in different locations seems inevitable and represents an extra cost. Operating in different regulatory regimes will also increase the burden on banks.

The Report also flags up China’s economy, Europe’s weak banks, and Donald Trump’s protectionist policies as potential causes of financial instability.

Here’s our full story from Washington:

Despite this week’s losses, the FTSE 100 is still up over 12% since last June’s referendum.

However, it’s NOT as simple as that, because the index is priced in sterling (so a weaker pound pushed up share prices).

In dollar terms, the Footsie is down around 1% since the Brexit vote:

Updated

FTSE 100 hits 11-week low

The FTSE 100 is continuing to slide, adding to yesterday’s 2.5% tumble.

The blue-chip index is now down 25 points at 7122, its lowest point since 2nd February, and putting it deeper into the red for 2017.

Burberry are still the biggest faller, down almost 6%, after reporting slowing sales growth this morning.

Silver miner Fresnillo are close behind, down 3%, followed by gold producer Randgold (-2.4%) , Rolls-Royce (-2.3%) and Royal Dutch Shell (-2%).

Leader of Britain’s Liberal Democrats, Tim Farron.
Leader of Britain’s Liberal Democrats, Tim Farron. Photograph: Chris J Ratcliffe/AFP/Getty Images

Analysts at RBC Capital Markets are predicting that the Liberal Democratic party will gain seats on June 8th.

The Lib Dems currently have just nine seats, having suffered a near-wipeout in the 2015 election. But their vocal opposition to Brexit is likely to win support from the 48% of voters wanted to Remain in the EU last year.

RBC say:

The recent opinion polls suggest a strong lead of the Conservative party over the biggest opposition party, Labour. The latest set of polls indicates that there will be a 19% lead in the popular vote. This would almost certainly increase the number of seats in the House of Commons from the current 17 to a much more sizeable majority.

Nonetheless, a lot can change between now and June 8 and it seems likely that the Liberal Democrats will be able to increase their number of MPs from the current setting as they are the only party openly campaigning on a pro-European tickets. In this respect heightened volatility in UK assets as we approach the election.

The new 12 twelve sided GBP .

After a calm morning, the pound has held onto Tuesday’s strong gains.

Sterling is broadly unchanged against the US dollar right now, at $1.285, and against the euro at €1.197.

Paresh Davdra, CEO and Co-Founder of RationalFX, says currency traders are hoping that Britain can avoid a particularly hard Brexit:

Through May’s snap election, she at last has the opportunity to take full control of the Brexit process and minimise the political uncertainty which has beset her tenure that had several implications for the currency.

Once again, the narrative of sterling has changed from one of uncertainty and volatility in the days following the referendum, to the relative stability of a defined negotiation period following the triggering of Article 50, and now to the possibility of renewed strength as the prospect of ‘soft’ Brexit and a more coherent negotiating position from the UK’s government becomes a possibility.

Morgan Stanley: Risk of disorderly Brexit has fallen

Morgan Stanley has predicted that the snap general election means Britain is almost certain to leave the single market.

But it also reduces the risk of a disorderly Brexit (assuming the polls are right, and the Conservatives win a larger majority).

That’s according to a new research note from MS on the general election. Here’s the highlights:

Why it virtually rules out staying in the single market: On Brexit, we expect the “sovereignty” red lines on UK control over borders, courts and laws, which were set out in the Lancaster House speech, to be put into the Conservative manifesto, effectively ruling out a Remain or EEA outcome. A Conservative government would then imply leaving the single market: either a WTO-like outcome where the UK re-establishes national control but at the cost of economic barriers with the EU, or a “clean Brexit” FTA outcome where the UK re-establishes national control while avoiding major barriers to business with the EU.

Why it reduces the risk of a disorderly Brexit: In the base case the UK government would have the Parliamentary majority to push through difficult decisions to seal a deal. In addition, the next Parliament should have time to complete Brexit negotiations before the next scheduled UK election in June 2022.

The latest UK opinion polls

FTSE 250 bounces back from Tuesday's slide

Back in the markets, Britain’s medium-sized companies, are bouncing back from yesterday’s selloff.

The FTSE 250 index, which is packed with UK mid-cap firms, has now jumped by 1% today to 19,491 points.

Familiar firms such as high street chain Dixons Carphone (+3.7%), holiday firm Thomas Cook (+3.3%) and builders merchants Travis Perkins (+3.5) are among the top risers.

Chris Beauchamp of City spread betting firm IG says the FTSE 250 has “leapt out of bed” as investors look to buy up UK-focused assets.

As the shock fades from the election announcement, there is a real possibility of a rebound in UK stocks, since yesterday’s fall provided the kind of dip that bargain hunters have been praying for over the past few weeks.....

Signs of weakness in the US market will give cause for concern, but overall it still looks like a strong update that points to more growth further down the line.

This takes the FTSE 250 back towards last week’s record high (19,525 points), and claws back most of Tuesday’s losses.

The FTSE 250 over the last decade
The FTSE 250 over the last decade Photograph: Thomson Reuters

But its big brother, the FTSE 100, is lagging behind - having shed all its gains for 2017 this morning following yesterday’s 2.5% tumble.

Updated

Many British firms will welcome the June election, as it should provide a little more certainty about the future.

So argues Karen Briggs, Head of Brexit (great job title!) at KPMG, who says:

“UK PLC understands the Brexit journey will be a bumpy one. We are getting used to a new normal where political shocks are commonplace, foreign exchange shifts dramatic and the UK’s labour supply in transition.

“Businesses desperately want to make a success of Brexit but their fear has long been that the sheer scale of the negotiations mean they cannot be completed in two years. This might mean vital details in everything from finance, to life sciences and aviation being missed or delayed - upending business models and affecting jobs.

“The prospect of a government now serving until 2022 creates a window for even clearer negotiating objectives and a less frenzied implementation period. Business will hope this makes for a smoother Brexit with more time to fix the intricate detail of a good deal and adequate time to prepare for necessary change.”

City traders have another market to watch....and this one shows Theresa May winning a majority of around 100 seats on June 8th , up from just 17 today.

Newsflash from Brussels: Eurozone inflation fell to 1.5% in March, down from 2% in February.

That’s mainly due to Easter falling in April, and matches the earlier ‘flash’ reading.

It’s rather lower than in the UK, where price are now rising by 2.3% year-on-year, as this chart hows....

UK general election: What the City says

Kathleen Brooks of City Index believes the UK pound will keep rallying against the US dollar as the British election campaign picks up.

The pound might even hit $1.35 (from $1.28 today), she argues, if the Conservatives look likely to win a large majority.

In and of itself the UK election shouldn’t be a key driver of UK asset prices, particularly if Theresa May wins a landslide, as she is expected to do. This election shouldn’t change domestic policy too much, and Brexit was going to happen with or without the vote on June 8th. However, if the polls are to be believed about the Tory lead over Labour then this election could add certainty to the UK’s Brexit positioning stance and to domestic policy for the next 5 years, and that is good for markets.

For GBP/USD 1.30 is now in view, and as we lead up to the election then we could see more unwinding of the GBP/USD short positions which could take us to 1.35 around the time of the election result.

Viktor Nossek, director of research at fund management firm WisdomTree in Europe, says investors expect Theresa May to do well on June 8th.

He says:

The sharp jump in the pound yesterday against a number of currencies, including the US dollar, was an acknowledgment that the snap election is likely to lead to more political certainty, given the Conservative Party’s lead in the polls.

There would be far more downside risk for the Prime Minister if she had waited another 12 months before acting, but by deciding to hold an election on June 8th - with the sentiment in the UK still in favour of Brexit - it means the Tories will be able to cement their position and allow the PM to get the political support needed to follow her agenda. The move has also given the opposition little room to prepare, and call for, an alternative to Brexit, or a watered-down version of it.

Yutaka Miura, a senior technical analyst at Mizuho Securities, told Bloomberg News that the snap UK election has unnerved some investors.

The market dislikes uncertainty.

Investors had already been a little on edge over the French presidential election, and now the UK general election is creating further uncertainty in Europe.

Here’s a list of the leading risers and fallers on the FTSE 100 this morning.

FTSE 100 best and worst performers

Iain Wright MP.

One of the MPs who did the most to hold Britain’s business leaders to account is stepping down.

Iain Wright, the Hartlepool MP who chaired the Business, Energy & Industrial Strategy Committee, has announced on Twitter he won’t run in the June 8 election.

Wright’s committee held some important inquiries this parliament, probing the scandal of the collapse of BHS and the unacceptable working practices at Sports Direct.

Updated

Britain’s retailers should be celebrating yesterday’s surge in the pound, as it will make it cheaper to import goods from abroad.

Analyst Nick Bubb comments:

Well, the Fixed Term Parliament Act was meant to bring us “stability” and “certainty”, but we are now told we need a General Election on June 8th for that…Time will tell whether an increased Tory majority will deliver the “softer” Brexit the City hopes for, but retailers will be pleased if sterling has now bottomed out…

Fashion group Burberry is helping to pull the FTSE 100 into the red today, after reporting underwhelming results.

Burberry’s shares have shed 6.7%, their worst fall since October, after reporting a sales slowdown, due to tougher conditions in the US.

CEO Christopher Bailey said the market was ‘uncertain’, despite strong sales in the UK as the weak pound encouraged tourists to buy Burberry items here.

The company’s finance officer has told reporters that Burberry remains committed to UK manufacturing, despite the Brexit uncertainty, and hopes that the UK will secure a trade deal with Europe that avoids returning to World Trade Organisation rules.

Back in 2015... Boris Johnson (then Mayor of London) tried on a Burberry scarf, during the opening night of the clothing designers new shop in Tokyo.
Back in 2015... Boris Johnson (then Mayor of London) tried on a Burberry scarf, during the opening night of the clothing designers new shop in Tokyo. Photograph: Stefan Rousseau/PA

Our Politics Live blog is up and running, and tracking all the election action.

Theresa May has already been interviewed on the Today Programme, where she’s ruled out a second EU referendum, and defended her decision to call a general election:

The FTSE 250 index, which is a better gauge of the UK economy than the FTSE 100, is having a slightly better morning.

It’s clawed back 43 points, or 0.23%, having lost over 220 points yesterday.

Pound hovers around $1.284

The pound is holding steady this morning - which is another way of saying that it’s not done much yet.

Sterling is trading at $1.284 against the US dollar, having surged to a six-month high of $1.29 late last night.

FXTM chief market strategist Hussein Sayed says the currency markets are closely focused on the pound.

Yesterday’s surprise move by U.K. Prime Minister Theresa May calling a snap election sent the British pound to its highest levels against the US dollar since October.

The 400-pip move [from $1.25 to $1.29] from low to high is not a reflection of the short-term fundamental outlook for the U.K.’s economy. But traders expect the snap election to lead to stronger negotiation powers with the EU on Brexit terms, thus a softer exit. Today we expect May to win parliamentary support for the snap election, but the reaction on the Pound to be mild, given it’s already priced in.

Robin Bew of the Economist Intelligence Unit reckons that low turnout might scupper Theresa May’s hopes for a whopping majority:

While advertising magnate Sir Martin Sorrell fears the election might have a dampening effect on the economy:

FTSE 100 sheds all its gains this year

Britain’s leading stock index has shed all its gains for 2017, as Theresa May’s election call continues to grip the City.

The FTSE 100 has fallen by 17 points at the start of trading, adding to the 180 points it lost yesterday.

That takes the blue-chip index down to 7130 points, below the closing price of 7142 on 30 December 2016. That’s also the lowest level since late January.

The FTSE 100 over the last six months
The FTSE 100 over the last six months Photograph: Thomson Reuters

Yesterday’s selloff was mainly due to a surge in the pound, as traders welcomed the snap election. A stronger pound erodes the value of overseas earnings, hitting the value of multinationals.

Tony Cross of TopTradr predicts that political uncertainty will weigh on the markets until the UK election is out of the way.

The market’s clear belief is that the incumbent party will win again, and with a bigger majority. This in turn will make for a cleaner break when the Brexit negotiations conclude – something that has driven the pound crosses out to six month highs.

Success in today’s vote in Parliament - which is required to approve the early election - is a foregone conclusion, but the risk is that the vote in early June doesn’t return the result that’s expected. Early polling suggests it will, but with the centrist Liberal Democrat party likely to make sweeping gains from their diminished current position, they could be the deal-makers again as they were in 2010. Given they are expected to be running on a ticket that promotes retaining single market access, we should be bracing for further volatility as this campaign unfolds over the next seven weeks.

Updated

The agenda: Election fever and IMF meeeting

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

City traders have come down with a double-dose of election fever.

The symptoms? Worrying about whether Marine Le Pen could sweep into the Élysée Palace, while also pondering how Theresa May’s snap general election call will effect the Brexit negotiations.

Campaign posters of the 11 candidates who run in the 2017 French presidential election.
Campaign posters of the 11 candidates who run in the 2017 French presidential election. Photograph: Jean-Paul Pelissier/Reuters

The French presidential election is looking increasingly right, with just four days until the first round of voting.

The consensus view, that centrist Emmanuel Macron would beat Le Pen in the second round in early May, is looking shaky. With right-winger Francois Fillon and Communist-backed Jean-Luc Melenchon both gaining ground, it’s hard to say exactly who’ll claim the prized top two places on Sunday.

The prospect of Le Pen and Melenchon contesting the run-off is causing some jitters in the City.

As correspondent Angelique Chrisafis reports from Paris, tension is mounting among Macron’s team too:

The independent centrist, who is running in his first election, had been seen as a frontrunner but faces a gruelling final few days before the first-round presidential vote this Sunday.

Styling himself as a pro-Europe progressive, he went from dark-horse outsider to favourite three months ago. But as polls narrow and a third of the electorate remains undecided, the race has become increasingly uncertain.

Macron’s supporters concede that the last few days of campaigning will be tough and unpredictable. Although polls have shown he could win a second round runoff on 7 May, Macron first has to make it to the final round – and that is not by any means guaranteed.

“The new president,” said one butcher as he posed for a selfie with Macron at the market. “He hasn’t won yet!” came the cry from the scrum of media recording the moment.

“You have to vote first,” Macron reminded him gently.

Meanwhile in London, MPs are expected to approve Theresa May’s plan for a general election on 8 June.

That shock decision sent the pound to a six month high last night, but also wiped £46bn off the FTSE 100.

The City’s snap reaction is that Theresa May will claim a large majority, strengthening her hand in the Brexit talks, and removing the chance of being derailed by either pro-Remain MPs or hard-line eurosceptics.

That could cut the chances of her final deal being rejected by parliament. But it doesn’t necessarily mean Britain gets a better deal.

As our financial editor Nils Pratley says, the Brexit talks will still be tough:

If delivering a “successful” Brexit involves making a few pragmatic compromises – which is surely the lesson from the initial skirmishes with the EU negotiators – you can’t blame May for seeking cover from the hard-liners in her own party. And kicking out the next election until 2022 seems a smart political move: it would allow time for a three-year transitional phase before UK voters go back to the polls, which could take the edge off any economic shock at the moment of Brexit in 2019.

So, yes, it was fair for investors to take some comfort in the idea that a market-friendly “soft” Brexit is now easier to imagine. Just don’t get too carried away with the idea. Investment uncertainties rarely evaporate so easily. If the election delivers a messy result – even a barely improved Tory majority – what would really have changed?

Coming up today...

The International Monetary Fund is releasing its Global Financial Stability Report at 1.30pm GMT. That will identify the biggest threats to the world economy.

We get a final estimate of eurozone inflation for March, at 10am BST (corrected).

New European car sales figures are out this morning (more on that shortly).

Fashion chain Burberry, food and closing group Associated British Foods and packaging group Bunzl are reporting results.

Updated

Sign up to read this article
Read news from 100's of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
“I'm, like, sobbing… in tears, because it was so… I mean, he's a poet”: Flea talks collabs and a new Chili Peppers album
He admits he cried when he heard Nick Cave’s vocal on his solo album
MusicRadar
MusicRadar
Full Masters Of The Universe Trailer Revealed Jared Leto's Voice As Skeletor, And I've Got Thoughts
By the power of Greyskull, I am confused.
Cinemablend
Cinemablend
Slash sale: Guns ‘n’ Roses star’s guitar to fetch up to £300,000 in music auction
Exclusive auction will see rare Slash, Queen, and Beatles memorabilia go up for sale in April
The Independent UK
The Independent UK
Sir Paul McCartney Banned From Reddit After Attempting to Post in r/PaulMcCartney
Paul McCartney's Reddit activity faced moderation after attempts to post in r/PaulMcCartney, sparking debate about platform rules, subreddit moderation, and how even global celebrities navigate online communities.
International Business Times UK
International Business Times UK
Say my name: For newcomer and racialized children, belonging begins with classroom greetings
The first time I understood that names could hold two worlds was not by changing mine, but by hearing it differently. As a Pakistani child growing up in Canada, I learned early that my name could sound different depending on who was saying it. My name is simple and deeply…
The Conversation
The Conversation
‘Death hunted him since he was a kid’: how Lamar Odom survived to become a villain in his own tale
A new documentary charts the tragic events that led to the former NBA star overdosing in a Nevada brothel – and what came next
The Guardian - US
The Guardian - US
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play