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The Guardian - UK
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Graeme Wearden (until 2.45) and Nick Fletcher

Pound volatile after mixed polls, while FTSE 100 slips from record high - as it happened

Bank buildings in the Financial centre of Canary Wharf.
Bank buildings in the Financial centre of Canary Wharf. Photograph: Alamy Stock Photo

Mixed day for European markets

The recovery in the pound has left the FTSE 100 in the red after the index earlier hit a new all time peak, and it was a fairly mixed picture elsewhere. With Wall Street falling back, European markets had an uncertain feel about them, with concerns about the forthcoming elections, not just in the UK but in Germany and perhaps Italy too. But despite this, they did manage to record their fourth straight month of gains, with the pan-European Stoxx 600 index up 0.9% in May. The final scores showed:

  • The FTSE 100 finished down 6.56 points or 0.09% at 7519.95
  • Germany’s Dax edged up 0.13% to 12,615.06
  • France’s Cac closed 0.42% lower at 5283.63
  • Italy’s FTSE MIB fell 0.4% to 20,731.68
  • Spain’s Ibex ended up 0.03% at 10,880.0
  • In Greece, the Athens market dipped 0.10% to 775.24

On Wall Street, the Dow Jones Industrial Average is currently down 40 points or 0.19%.

On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.

Here’s Reuters on the correction to the earlier Chicago purchasing managers’ report:

The initially reported headline figure for the Chicago PMI was apparently incorrect and Market News International has “revised” it to 59.4 from 55.2 first reported. The update changed the entire complexion of the original report and renders earlier market analysis largely inoperative. It took the headline index from an initial report of a 4-month low to being a 30-month high. MNI removed the original May release from the ISM-Chicago website but did not explain its error.

More on the UK election opinion polls:

A recovery in the pound on the latest opinion poll news has taken the shine off the FTSE 100.

Sterling is currently up 0.34% against the dollar at $1.2903, up from its low of $1.2767. The late positive run for the currency has seen the FTSE 100, which hit an intra-day high of 7586, slip into the red at the close, down 0.09% at 7519.95.

Neil Wilson, senior market analyst at ETX Capital, said:

Sterling is flying at month end. Some month-end positioning and new polls showing a renewed Tory lead helped lift the pound over the $1.29 handle, amid signs that trading in sterling will be fairly choppy in the coming days.

It looks like the foreign exchange market has decided to shrug off that YouGov survey which indicated a hung parliament is the most likely outcome from the June 8th poll.

Instead the pound was buoyed by a PanelBase poll that gives the Tories a very healthy 15-point lead over Labour. Following on from this a Kantar poll added to the positive sentiment after it revealed the Conservative share of the vote had ticked up one percentage point in the last week, to 43%.

Meanwhile there are reports that the Chicago data from earlier has been corrected.

The purchasing managers’ index was initially said to have fallen from 58.3 to 55.2, but now it has apparently been revised to show a rise to 59.4.

Connor Campbell, marketing analyst at Spreadex, said:

You can tell the election is just over a week away, as the market has been abuzz with volatility this Wednesday afternoon.

In the UK polls have continued to be the main driver of trading, with the UK markets remarkably sensitive to each individual survey. The latest report came from PanelBase, which gave Theresa May’s Tories a 15-point lead over Labour, news that not only helped the pound erase its losses against the dollar, but sent the FTSE to a fresh all-time high. The fact that the pair moved in the same direction is notable, suggesting that the FTSE wants a Tory win just as badly as sterling, even if the weakened pound has been the main driver behind the UK index travelling to its current record levels.

Things have calmed down since then, however. The FTSE has reverted to the 20 point rise it saw this morning, leaving it 40 or so points away from its intraday peak. As for the pound, while it has held onto its growth against the greenback, it still finds itself in the red against the euro, though sterling has lifted away from its 2 and a half week lows.

Sterling edges higher after new polls shows increased Conservative lead

Sterling has now recovered all its lost ground against the dollar, as a new poll from Kantar shows the Conservatives increasing their lead over Labour from 8 points to 10 points.

Sterling is now 0.2% better at $1.2882 having earlier fallen as low as $1.2767. Against the euro the pound has recovered to €1.1476, down 0.16% after being as low as €1.1432.

Meanwhile the FTSE 100 has fallen back from its record highs and is now up just 20 points or 0.27%.

UK growth will slow due to Brexit uncertainty - Moody's

Back with the UK, and ratings agency Moody’s has raised its forecast for economic growth this year but warns Brexit related uncertainty will have an effect eventually. It said:

The British economy grew at a quarterly annualised rate of only 0.8% in the first quarter of 2017. Consumer spending, which has been a strong driver of growth since mid-2016, is slowing as a rise in inflation squeezes real wages.

We expect that the UK economy will grow around 1.5% this year, slowing further to 1% in 2018 owing to a slowdown in investment amid Brexit-related uncertainty.

The upward revision to our 2017 forecast from 1% previously recognises that the speed of the slowdown so far has turned out to be more moderate than we had previously estimated. Otherwise, we have not fundamentally changed our view that post-Brexit uncertainty will eventually weigh on economic activity.

The agency’s other key points in its latest global assessment include:

  • The improving outlook for global growth in 2017 appears to be sustainable as some of the biggest risks to advanced economies have subsided and emerging markets maintain their expansion.
  • Moody’s expects G20 economies, which account for 78% of the global economy, to collectively grow at an annual rate of 3.1% in 2017 and 2018, compared with growth of 2.6% in 2016.
  • The potential damage to global trade and economic growth from a pursuit of protectionist policies in the US, and consequent retaliation, seems to have diminished for now.
  • Moody’s expects the ongoing recovery to continue in 2017 and 2018, supported by accommodative monetary conditions, a strengthening global economy and rising employment.
  • The outcome of the French presidential election should also support recovery because it significantly reduces the risk of a European Union exit by a major economy.

US home sales in surprise drop

Another set of US data has missed expectations.

Sales of previously owned US homes fell by 1.3% in April, compared to forecasts of a 0.5% rise. This is the second straightly monthly decline, according to the National Association of Realtors.

The year on year fall was 3.3%, the first decline since December and the largest since June 2014. The association’s chief economist Lawrence Yun said:

Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market. Realtors are indicating that foot traffic is higher than a year ago, but it’s obviously not translating to more sales.

Prospective buyers are feeling the double whammy this spring of inventory that’s down 9.0 percent from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income.

Despite Canada’s impressive economic growth in the first quarter, the International Monetary Fund points to possible problems ahead:

In the wake of the poor Chicago data, US markets have gone into reverse.

The Dow Jones Industrial Average is currently down 34 points or 0.17%, while the Nasdaq composite - have earlier hit a new high - has now slipped around 0.1%. The S&P 500 is also down a similar amount.

Over in the US, and a disappointing outcome from the latest Chicago purchasing managers’ index:

This is the slowest rate of growth since January.

Updated

Over in New York, the Nasdaq has just hit another record high at the start of trading.

City traders are catching their breath after a busy morning of sterling volatility, and another record high on the FTSE 100.

Fawad Razaqzada, market analyst at Forex.com, sums up the morning:

What a comedy show this is turning out to be. Last night saw sterling tumble after research by the Times newspaper and YouGov suggested that there could be a hung parliament. Today, it retraced all of those losses after a Panelbase Poll showed that the Conservatives’ lead was not only intact but that it had risen to 48% from 47% previously, while the Labour party remained unchanged at 33%.

Razaqzada adds that we should “get used” to the volatility.

Sterling is currently reacting negatively to any narrowing in the polls between the two major parties mainly because of the threat of Labour’s promise of corporation tax increases, which is deemed by the market as growth-chocking and not so business-friendly.

If new polls show support for Theresa May is falling then the pound could fall once again, and vice versa. It is as simple as that. Thus, UK data should continue to play second fiddle to politics until the elections are over.

Meanwhile, the stock market is enjoying its best month of 2017. Selling in May and going away wouldn’t have paid off this year, yet anyway......

UK comes bottom of G7 growth table as Canada powers ahead

A Canadian national flag.

Newsflash: Canada’s economy grew by an impressive 0.9% in the first three months of this year, outpacing other advanced economies.

Household spending and business investment helped to drive growth across the country in January to March, new figures show.

It’s a little weaker than expected; some economists forecast growth of above 4%. But it’s still means the Canadian economy is expanding at a healthy pace.

Canada is the final member of the G7 to report its growth figures. And we can now see that the United Kingdom is officially the joint-worst performing member of the G7 so far this year.

Britain’s GDP only expanded by 0.2% in the first quarter of 2017, as rising inflation and weak net trade dragged the economy back. That was a much sharper slowdown than feared.

Figures released last week showed that Britain’s “consumer facing industries” suffered a slowdown, exports fell, and the dominant service sector struggled as the weaker pound pushed up import prices.

Here are the growth rates for the G7 members in the first quarter of this year:

  • Canadian GDP: +0.9% growth
  • German GDP: +0.6% growth
  • Japanese GDP: +0.5% growth
  • French GDP: +0.4% growth
  • US GDP: +0.3% growth
  • UK GDP: +0.2% growth
  • Italian GDP: +0.2% growth

Updated

Newsflash: India’s economy grew slower than expected in the first three months of this year.

Indian GDP expanded by 6.1% over the year, weaker than expected. Economists had forecast annual growth of between 6.5% and 7.8%.

The FTSE 100 is continuing to hit new record highs. It’s now reached 7576 points for the first time ever, up 49 points (or 0.66%).

Banks are leading the way, with Standard Chartered up 3.3% and Barclays gaining 2.4%.

Fashion chain Burberry is in demand too, with shares up 3.1%.

FTSE 100 hits fresh alltime high

Britain’s blue-chip index has just hit a new alltime high, as general election action continue to grip the City.

The FTSE 100 index has hit 7563, up 37 points today, and breaking through last Friday’s peak of 7554 points.

The FTSE 100 over the last decade
The FTSE 100 over the last decade Photograph: Thomson Reuters

Shares pushed higher after PanelBase’s new poll gave the Conservative’s a 15 point lead was released, calming fears over a hung parliament.

“The markets seem to be saying that a strong Tory majority is better for the pound and better for equities,” explains Neil Wilson of ETX.

The pound’s sensitivity to these opinion polls is a little concerning.

This chart shows how sterling hit a six-week low after YouGov predicted a hung parliament, but bounced back as Panelbase reported a solid Conservative lead of 15 points.

Newsflash: The pound is pushing higher after a new opinion poll gave Theresa May a 15 percentage point lead ahead of next week’s election.

Panelbase report that the Conservative Party have 48% support, compared to Labour’s 33%.

That has sent sterling back up to $1.284, clawing back most of the losses since the YouGov poll released last night.

Updated

James Andrews, head of investment management at Redmayne-Bentle, predicts that the pound is entering choppy waters.

He fears that further losses against the euro and the dollar are likely, as the European economy recovers.

We are likely to continue to see volatility in the Pound in the run-up to the election, and indeed for the foreseeable future, as Brexit negotiations step-up post the outcome of the election.

Given the prolonged uncertainty ahead of us, not to mention this short-term election-driven uncertainty, it seems any relief rallies will be just that, and the Pound will find it difficult to sustain any upward momentum. In addition, further rate rises in the US and stronger fundamentals from the European economy will likely see strengthening of the Euro and the Dollar, providing further headwinds for Sterling going forward.”

The pound isn’t looking particularly strong and stable. Instead, the worst-performing major currency so far today.

Pound dragged down to six-week low

Sterling has now sunk to a six-week low against the US dollar as the selloff picks up pace.

The pound has fallen to $1.278, its lowest level since Theresa May called a general election on April 18th.

The news that Britain’s mortgage approvals hit a seven-month low in April pushed the pound lower:

The pound vs the US dollar
The pound vs the US dollar Photograph: Thomson Reuters

YouGov’s prediction that Theresa May could fail to win a majority in next week’s general election is also weighing on the pound, despite some scepticism over its accuracy.

Geoffrey Yu of UBS Wealth Management suggests the pound may bounce back, as other polls show the Conservatives winning a working majority.

“The latest poll suggesting a hung parliament is likely has shaken markets.

Were this to be the outcome of the General Election on 8 June, we can expect a repeat of this behaviour, with significant volatility in sterling. Yet today’s poll distracts from the many others showing that a Conservative majority remains the most likely outcome, as is our base case. With no further indications of a hung parliament, the recent fall in sterling may be seen as a buying opportunity for investors.

Eurozone unemployment hits lowest since March 2009

Unemployment across the eurozone has hits its lowest level since the financial crisis, in another sign that Europe’s recovery is gathering pace.

The eurozone jobless rate dipped to 9.3% in April, reports Eurostat, the lowest in over eight year.

March’s figure has been revised down from 9.5% to 9.4%.

Across the whole European Union, the jobless rate fell to 7.8%, from 7.9%.

Eurostat estimates that 19.121 million men and women in the EU were unemployed last month, including 15.040 million in the euro area.

Among the Member States, the lowest unemployment rates were recorded in the Czech Republic (3.2%), Germany (3.9%) and Malta (4.1%). The highest unemployment rates were observed in Greece (23.2% in February 2017) and Spain (17.8%).

The eurozone youth unemployment remains disappointingly high, though, at 18.7%. There are now 2.617 million under-25s out of work, a drop of 419,000 compared with a year ago.

Eurozone inflation drops to 1.4%

Newsflash: inflation across the eurozone has fallen to 1.4% this month, down from 1.9% in April.

That’s a sharp drop, as prices returned to more normal levels following Easter.

It should encourage the European Central Bank not to risk tightening monetary policy too quickly.

Eurostat reports that energy prices rose by 4.6% compared with a year ago, due to the pickup in the oil price. Food, alcohol and tobacco prices rose by 1.5%, service sector prices gained 1.3%m, while industrial goods only inched up by 0.3%.

UK housing slowdown deepens

Breaking: Britain’s housing market cooled off in April, with mortgage approvals falling to a seven month low.

Just 64,645 mortgages were approved by banks and building societies last month, new figures show. That’s the smallest increase since September 2016.

Net mortgage lending also cooled off, with the smallest increase in a year, in another sign that potential housebuyers are being more cautious.

Today’s figure follow signs that house price growth has been slowing, particularly in London.

Updated

British households have become more upbeat about their personal finances and the economy despite the political uncertainty and rising prices in the shops, according to a new survey.

UK consumer confidence defied economists’ forecasts for a dip and instead edged higher in May as measured in a monthly barometer from market researchers GfK. Its main index rose to -5 from -7 in April.

Despite a rise in inflation and stalling wage growth, households were more upbeat about the state of their finances, the outlook for their finances and the state of the economy when compared with April. But on all three measures they were less confident than a year ago, when the UK had yet to vote for Brexit.

The poll of 2,000 people on behalf of the European Commission also showed people were more confident this month that now was a good time to make a major purchase such as furniture.

“We have an unexpected uptick in the barometer this month,” said GfK spokesman Joe Staton.

German jobless rate hits lowest since reunification

Newsflash: Germany’s unemployment rate has hit its lowest rate since the country was reunified 27 years ago.

The jobless rate across Europe’s largest economy fell to 5.7% in May, new figures from the German Labour Office show, down from 5.8% in April.

The number of people out of work fell by 9,000 this month, on a seasonally adjusted basis, to 2.536 million.

This should cause some relief in Berlin, following some weaker-than-expected German retail sales figures this morning. Takings surprisingly fell by 0.2% in April, dashing hopes of a 0.2% rise.

FTSE closes in on new lifetime high

The pound’s decline has helped to push up the value of multinational firms listed in London.

Consumer goods giant Unilever, international packaging firm Monti and information group RELX (formerly Reed Elsevier) have all gained around 1%.

This has pushing the FTSE 100 up by 20 points to 7545, only 10 points away from breaking last week’s alltime high.

Edward Hardy of currency exchange firm World First reckons YouGov’s poll should come with a “a major health warning”.

Pollsters don’t usually project constituencies seat-by-seat and there’s a reason why; the margin of error leaves the likelihood of this poll coming true particularly small.

It’s a very fair point; City strategist Ioan Smith has also pointed to the large margin of error:

But that hasn’t stopped the pound shedding half a cent against the dollar since the poll came out.

Sterling has also lost ground against the euro this morning, losing 0.4% to €1.145.

That means one euro is now worth 87.33p (compared to 76p before last June’s EU referendum).

Kit Juckes of French bank Societe Generale believes the euro will keep climbing against the pound:

The importance of politics as a market driver currently can’t be overstated. Perhaps that shouldn’t surprise anyone when the economic backdrop is relatively dull.

This morning, the pound is the main victim again as a YouGov poll points to a possible hung parliament as the Conservatives risk losing seats in next week’s election. We’re supposed to treat polls with suspicion but needless to say, we remain bullish of EUR/GBP even if I’ve lost my bet that it would trade above 0.90 by the start of this week

Updated

City Index: Slim chance of a hung parliament

Kathleen Brooks of City Index is sceptical about YouGov’s prediction, arguing that the pollster’s methodology is too untested to make such sweeping claims.

She thinks it most likely that the Conservatives will win a small majority, but fears that even this could hit the pound.

We think there is a chance of a deeper sell off back towards $1.20 if it looks like Theresa May won’t have a big enough mandate to agree a trade deal with the UK. The prospect of no deal from the Brexit negotiations has spooked investors and may continue to do so after this election. This could weigh on sterling and the broader FTSE 350 index.

There’s only a ‘slim chance’ of a hung parliament, she reckons -- but it would certainly hurt sterling and share prices if it happened.

We would expect the political uncertainty that could arise from a hung parliament and a potential change in leadership would weigh heavily on the pound and the FTSE 100.

YouGov’s shock forecast that the Conservative Party could lose 20 seats in next week’s election is the talk of City this morning.

The suggestion that Britain could be left with a hung parliament next week has cast a cloud of uncertainty over the financial markets, says Neil Wilson of ETX Capital.

He says:

A hung parliament is the nightmare scenario for May. It would constitute a massive personal failure and undoubtedly make for great domestic political uncertainty at the worst possible moment for Britain.

If Mrs May fails to get the thumping majority she hopes for, her position will be a lot less secure than before she called the snap election.

Mrs May has made this campaign particularly personal and a failure to secure a large swathe of new Tory MPs would be seen a failure of hers. This risks throwing open a Tory leadership contest and the prospect of a hard-line Brexiteer in charge. Boris Johnson is waiting in the wings. A hung parliament could easily see Jeremy Corbyn become prime minister – investors simply wouldn’t know where they stood.

And that means the pound is now saddled with an “added political premium” until the result is known.

Updated

Pound hit by hung parliament predictions

A new forecast that Britain could be left with a hung parliament next week has knocked the pound.

Sterling fell below $1.28 after YouGov analysis , published in The Times, suggested that Theresa May could be left 16 seats short of an overall majority.

This prediction has caused some alarm in the foreign exchange markets, where traders had been expecting that the Conservatives would secure a large majority.

Naeem Aslam, chief market analyst at Think Markets, explains:

In the currency market, it is the British Pound which has attracted the most attention as the latest polls from YouGov shows that the big gamble by Theresa May could cost her majority lead in parliament. This is not something which she has pictured but again, the same story goes for David Cameron when he took the gamble for the Brexit vote. The YouGov poll shows that her party could lose as much as 20 seats and Labour could gain nearly 30 additional seats. So much for all the rhetoric “making her hand strong in the parliament”.

This has taken a toll on the British pound, and it has lost ground against a basket of currencies.

The pound vs the dollar since 10pm last night
The pound vs the dollar since 10pm last night Photograph: Thomson Reuters

Aslam believes the pound is vulnerable to further losses too:

Investors are worried about a hung parliament, and if we get more polling data which confirms that the possibility of a hung parliament is more real, we could see the British pound losing ground against the dollar and the Euro. We do think that the sterling-dollar pair could drop all the way to 1.26 mark if we break the support of 1.2752.

YouGov’s forecasts is controversial, though, as polling companies don’t usually produce these kind of seat-by-seat projections.

And The Times itself admits that the estimates has plenty of wiggle room, saying:

“The poll allows for big variations, however, and suggests that the Tories could get as many as 345 seats on a good night, 15 more than at present, and as few as 274 seats on a bad night,”

But still, it’s enough to get traders jittery.....

Updated

The agenda: eurozone inflation and jobs report

The flag of the European Union.

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

Today we’ll be watching the pound closely, as Britain’s general election campaign enters the final stretch ahead of the June 8 dash to the polls.

The latest opinion polls are painting a mixed pictures; some suggest a solid Tory majority, others reckon Theresa May could even lose seats, so it’s a testing time to be a currency trader.

New economic data from the eurozone will hit the wires this morning. It’s likely to show that Europe kept creating jobs last month, as the recovery from the debt crisis continues.

The eurozone’s inflation rate probably also fell sharply this month; taking some of the heat off the European Central Bank to consider tightening its stimulus programme.

Canada will also be in focus later, when its first quarter growth figures are released. It’s likely to have been one of the best-performing advanced economies in Q1, outpacing the UK.

The agenda:

  • 8.55am BST: German unemployment figures for May; the jobless total is expected to fall by around 15,000
  • 9.30am: UK consumer credit figures for April
  • 10am BST: Eurozone unemployment figures for April; the jobless rate is expected to drop to 9.4% from 9.5%
  • 10am BST: Eurozone inflation figures for May; CPI rate is expected to drop to 1.5% from 1.9%
  • 1.30pm BST: Canadian GDP for the first quarter of 2017; economists predict annualised growth of around 4%

Updated

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