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FTSE 100 suffers worst day since Brexit vote after May calls election

Ftse 100 Trend

Ftse 100 Trend

 


Powered by Guardian.co.ukThis article titled “FTSE 100 suffers worst day since Brexit vote after May calls election” was written by Patrick Collinson, for The Guardian on Tuesday 18th April 2017 17.11 UTC

More than £45bn was knocked off the value of shares in Britain’s biggest companies following Theresa May’s snap general election announcement, with the FTSE 100 index suffering its worst day since the Brexit referendum as a rally in the pound hit the stock market.

Most multinationals listed on the London stock exchange earn the majority of their profits in dollars, which have been worth more due to sterling’s decline in the wake of the EU vote. However, sterling’s swift rise following the prime minister’s surprise move sent major stocks tumbling, with mining conglomerates hit hardest.

After an initial wobble when news of the election hit the market, the pound powered ahead, hitting a four-month high against the dollar of .283. Against the euro, sterling also surged to €1.19, a gain of 1%. In a striking reversal of the post-referendum stock market, the FTSE 100 closed down 180 points on the day, a fall of 2.5% that wiped about £45.7bn off valuations.

Confidence in the City about an easy victory for the Conservatives was behind much of sterling’s rise, with many speculating that a victory will give May a stronger mandate to plot a moderate line on Brexit and resist hardline anti-EU backbenchers.

Keith Wade, chief economist at fund manager Schroders, said: “A successful election would give May the mandate to pursue her own Brexit strategy. My sense is that a stronger mandate and more time would allow a more patient approach and a softer Brexit, probably more in line with May’s instincts.”

The FTSE 100 index

Deutsche Bank declared that the general election was a “game changer” for the pound, forcing it to tear up its sterling forecasts.

The bank has been one of the most bearish voices in the City about sterling. Last month, it predicted that the pound would fall further as Brexit negotiations began. But in the wake of the snap general election, it said it was ditching its bets against the pound.

The stockbroker Brewin Dolphin said that the rise in sterling might appear “counter-intuitive” as traders have been betting on sterling falling ever since last June’s Brexit vote.

“The election is likely to shore up the government’s hard Brexit line, making it even more likely to happen. However, we have felt for a while that the pound would rally. The devaluation that has taken place since the EU referendum has left sterling looking undervalued. Eventually those who have been speculating on its decline would need to close their positions,” said head of research, Guy Foster.

Pound v dollar exchange rate

The property market typically seizes up during a general election campaign, with buyers deferring purchases until a result is clear. But estate agents said the period of uncertainty will be short.

Alison Platt, the chief executive of estate agency network Countrywide, said past trends have shown a clear correlation between general elections and levels of sales in the property market. She said: “Analysis of sales transactions over the course of the last nine general elections indicates there will be a dip in activity pre-election, but post-election there will be a bounce-back in the number of sales in the market.”

guardian.co.uk © Guardian News & Media Limited 2010

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About Carl William Brown

I'm Carl William Brown a holistic teacher, a webmaster, a trader, and a writer of aphorisms and essays. I have written more than 9,000 original quotations and at present I'm also working at my only novel, Fort Attack, which is also a wide and open blog project. At the moment I'm teaching English in a secondary school, but up to now I have done a lot of other things as well, both in business, educational, sport and social fields. Some years ago, in 1997 following the examples of the Rotary or the Lyons Clubs I founded the Daimon Club Organization to promote every sort of activities, creativity, art, literature, new technologies, informatics, business and marketing, public health and education and to meet new friends with these kind of interests.
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