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Britain’s pound sterling gave up recent gains after exit polls forecast the U.K.’s ruling Conservative party would not secure a majority following the country’s general election.
The pound slumped nearly 2% to almost touch USD1.27, before paring some of those losses, after a poll showed that the pro-business Conservatives would only secure 314 seats in Britain’s 650 seat House of Commons. A party needs 326 seats to govern as a majority government. That leaves the possibility of the left-leaning Labour party governing as part of a minority coalition, possibly with the country’s Liberal Democrats and Scottish nationalists.
At the time of writing, Labour was on 76 seats (a positive swing of seven) and the Conservatives on 62 (a swing of zero). The Scottish National Party, the third biggest party in the U.K.’s House of Commons, was down five seats to 13. Only 158 seats have been declared so far.
U.K. bookmaker Paddy Power still has Theresa May as favorite to be next prime minister, although only marginally so. The exit poll, conducted NOP/Ipsos MORI for several U.K. news stations surprised by forecasting a loss of 17 seats for the Conservatives and a gain of 34 for Labour, led by socialist Jeremy Corbyn. That forecast was more bewildering given May called the election willingly last month, given polling at the time showed her party would secure a large majority. The biggest issue by far for voters in this election has been Britain’s coming exit from the European Union. May has advocated walking away from negotiations if the country can’t get the deal it wants, while Labour under Corbyn wants a softer approach, including staying in the single market and the E.U. customs union.
Asian markets were fairly calm on Friday morning. Japan’s Nikkei 225 was up 0.2%, while Australia’s ASX 200 slipped 0.2%.
Here’s some analysis from Colombia Threadneedle on market implications for a Corbyn victory:
If Labour wins –
· A surprise result whereby a labour government is formed may trigger an extreme negative market reaction
· Equity markets may fall, as UK plc is impacted by a hike in corporate tax rates and other policies
· Sterling may also fall on a Corbyn win
· A labour victory may result in higher borrowing and looser fiscal policy which would see a higher gilt curve
If May snatches victory, expect this to happen:
If Conservatives wins –
· A Tory majority was priced in three weeks ahead of the election so markets may see this result as ‘business as usual’ with minimal market impact
· A large Tory majority may be perceived initially as positive for the chance of a ‘good deal’ from Brexit, and may support UK assets
· A smaller majority (or hung parliament) may see gilts outperform as Brexit uncertainty raises growth risks
· Sterling may rise on a Tory victory
Tom Elliott, an investment strategist at deVere’s Group in London, released his analysis before the polls opened on Thursday. In the event of no overall majority for any of the parties, he believes this will happen:
A Labour/Liberal Democrat pact could emerge to govern. The Lib Dems would likely ensure a soft Brexit – a Norway-like arrangement, but without free movement of people, in return for large annual payments to Brussels. But sterling, UK-focused stocks and gilt prices would all fall on the prospect of the Labour leader, Jeremy Corbyn, becoming Prime Minister.
June 09, 2017 at 07:12AM
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from Daniel Shane
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Axis Direct is bullish on MCX has recommended buy rating on the stock with a target price of Rs 1397 in its research report dated May 09, 2017.
