Pound Sinks on U.K. Election Results
June 09 2017 - 4:09AM
Dow Jones News
By Riva Gold and Lucy Craymer
Stocks geared to the U.K. economy fell sharply Friday while the
pound slumped after British voters deprived Prime Minister Theresa
May and her ruling Conservative party of a majority in
Parliament.
Sterling was last down 2.4% at $1.2641 as investors feared a
hung Parliament would usher in a fresh period of political
uncertainty and make it more difficult for the U.K. to secure a
favorable deal in its negotiations to exit from the European
Union.
"Brexit still goes ahead, but who is negotiating and what their
position is and whether they can do a deal and get it passed
through Parliament is less clear," said John Stopford, head of
multiasset income at Investec Asset Management.
London's FTSE 100 index, which generates roughly 70% of its
revenues overseas, rose 1.3% in the early minutes of trading as
exporters benefited from a weaker currency. Shares of British
American Tobacco, which has almost no revenue ties to the U.K.,
rose 2%.
But companies who generate the bulk of their revenues in the
U.K., including Lloyds Banking Group, Taylor Wimpey and Barratt
Developments PLC fell 3.4%, 5.2% and 3.3% respectively. Stocks in
the U.K. have historically fallen in the short-term following news
of a hung parliament.
"We expect U.K. risky assets to come under pressure, as markets
will start pricing in a scenario of high political uncertainty, a
growth slowdown and possibly disorderly Brexit," said Daniel
Vernazza, chief U.K. economist at UniCredit Research
Longer term, some investors see a move away from fiscal
austerity and the possibility of a "softer" Brexit as potentially
supportive for U.K. assets. But "at the moment, the market is
focusing more on the uncertainty than any change in direction of
monetary and fiscal policy" that could result, Mr. Stopford
said.
Elsewhere in stocks, the Stoxx Europe 600 rose 0.3% in morning
trading despite declines in real estate and travel shares. Futures
pointed to a 0.2% opening gain for the S&P 500.
Earlier, Japan's Nikkei pushed back above 20000 as the dollar
climbed against the yen, supporting exporters in the index. Shares
of SoftBank jumped to 17-year highs following a surge in Alibaba
shares in the U.S. The Japanese firm owns 28% of the Chinese
internet heavyweight.
Korea's Kospi was up 0.8% and in fresh record territory, helped
by a rise in shares of Samsung Electronics, which has the biggest
weighting in the index.
Stock-market moves elsewhere in the Asia-Pacific region were
more muted. Benchmarks in Australia were flat, while Hong Kong's
Hang Seng Index fell 0.5%.
The moves followed a quiet session in the U.S. as investors
appeared to show little reaction to Mr. Comey's testimony Thursday
about interactions with President Donald Trump before his
firing.
In commodities, Brent crude oil futures were down 0.2% and gold
eased 0.3% as both were weighed down by a stronger dollar. The WSJ
Dollar Index, which tracks the dollar against a basket of 16
currencies, was up 0.4%.
Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at
Lucy.Craymer@wsj.com
(END) Dow Jones Newswires
June 09, 2017 03:54 ET (07:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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