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FTSE 100 rises as May's new government is DUPed

Last updated: 17:00 09 Jun 2017 BST, First published: 06:33 09 Jun 2017 BST

London
  • FTSE 100 up 77 points on the day; down just 21 points on the week

  • Theresa May's new government is DUPed 

  • Sterling falls heavily (benefiting many of the FTSE 100 constituents)

Close: May attempts to shut the strong and stable door after victory horse has bolted

A hung parliament may have been the worst case scenario for yesterday’s General Election but it did not stop the FTSE 100 from rising today.

It was the pound that got it in the next after the underwhelming performance of the Conservative party in yesterday’s election, losing almost two-and-a-half cents against the US dollar at US$1.2708 and two cents against the euro at €1,1355,

The index is riddled with companies that earn the bulk of their money overseas, so sterling’s weakness was good for them, which makes the blue-chip index’s rise explicable, besides which there is the hope - forlorn, some might say - that Theresa May’s government will limp on for a year or two with the help of the Democratic Unionist Party (DUP).

READ Theresa May confirms Conservatives will form government with DUP

The FTSE 100 ended the day at 7,527, up 77 points on the day and down just 21 points on the week.

US bank Wells Fargo explained for those not au fait with the British parliamentary system what was likely to happen now that no party has an overall majority.

As we now know, May has opted to get into bed with the DUO and operate under a “confidence and supply” arrangement; this was described by Wells Fargo as “unstable” by its very nature.

So much for “strong and stable” government, then.

That horse has bolted and it is no good shutting the strong and stable door. 

4.00pm FTSE ending week in fine fettle as election fears ease

London's blue chip was 73 points at 7,523 higher heading into the weekend and boosted by more records being broken in New York.

 

2.45pm... Gain on Wall St, UK shares unfazed by political machinations

FTSE 100 is being pulled higher by a strong start on Wall Street, where the Dow Jones Industrial Average has added 56 points to 21,237, another new record high.

In the UK, Footsie has risen 53 at 7,503, with the miners and other large dollar earners more than offsetting weakness for housebuilders and retailers.

Theresa May has confirmed herself as prime minister after cobbling together an alliance with Northern Ireland's Democratic Unionists and claims it will govern the UK with 'certainty'.

Fresnillo, Smurfitt Kappa PLC (LON:SKG) and copper miner Antofagasta PLC (LON:ANTO) were the three best risers with Taylor Wimpey PLC (LON:TW.) and Marks & Spencer PLC (LON:MKS) among the heaviest of the fallers.

 

1pm - FTSE 100 remains higher 

FTSE 100 is still higher at 1pm, bolstered by big resource stocks, after Theresa May had her audience with the Queen.

She will seek a minority government supported by the DUP and she says the Brexit negotiation timetable remains the same.

"Having secured the largest number of votes and greatest number of seats in the general election, it is clear the Conservatives and Unionist party has the legitimacy to provide that (certainty)," she said, reading a statement outside No 10.

FTSE 100 is up 32 at 7,482, but FTSE 250 is down 68 at 198,675. The pound is near flat against the US dollar

Brent Crude has slipped considerably , down 3.54% to $48.20 at the time of writing.

In other news, City analyst are saying that the timing of the next interest rate hike could be pushed back to the first half of 2020 following the shock vote.

 

Noon: Miners keep FTSE 100 bubbling in spite of election shock

Miners and other dollar earners are leading the FTSE 100 higher as the country reels from the shock collapse of support for Theresa May’s government at the polls.

May is going to try to form a government with the help of Northern Ireland’s Democratic Unionists, but her critics are already sharpening the knives saying she has been seriously wounded by this dismal result.

When the PM called the election, predictions were for a 100-seat majority.

FTSE 100 was 32 points ahead at 7,482 as some of the early surge dissipated on reflection.

Neil Wilson at ETX markets said the index is being propped up by dollar earners benefiting from a weaker pound with defensive stocks also doing well.

WATCH: Election result a shock but no reason to start selling

Those with heavy exposure to the UK economy, such as Lloyds Banking Group PLC (LON:LLOY)  have been hit harder as has the more UK-focused FTSE 250 index.

Best of the risers were Mexico-focused gold and silver miner Fresnillo PLC (LON:FRES) up 4.6% to 1,741p, Africa-focused goldminer Randgold Resources PLC (LON:RRS) up 2.9% at 7,710p and Asia-focused bank Standard Chartered PLC (LON:STN) up 2.2% to 776p.

All report in dollars so should get an earnings lift on translation from the 1.6% dive in the value of the pound against the dollar.

Housebuilders were weak on concerns for the UK economy after the election, with Taylor Wimpey PLC (LON:TW.), Barratt Developments PLC (LON:BDEV) 2.7% lower at 574p and Royal Bank od Scotland PLC (LON:RBS) presumably on re-nationalisation and tighter regulation fears. Shares eased 2.8% to 249p.

11.00am...FTSE 100 up 54 points at 7,504

No sign of the Brexit in miniature" rally, as IG's Chris Beauchamp described it, fizzling out yet.

Theresa May is expected to stay on in charge of a coalition with Northern Ireland's DUP, while negotiations with Europe over the UK's withdrawal are set to be much more conciliatory.

Dollar earners are leading the index higher.

 

8.30am: Footsie strong, but second liners suffer

Defying expectations, the  FTSE 100 index pushed higher at open as dollar earners got a boost from the drop in the pound following the uncertain UK election results which has left the country facing a hung parliament.

Around 8.30am, the UK blue chip index was about 1%, or 72 points higher at 7,522, despite predictions for an opening fall having shed 28.64 points yesterday on Polling Day.

On currency markets, sterling dived by around 2% after prime minister Theresa May’s election gamble back-fired, with her Tory party losing seats rather than gaining a bigger majority to provide a stronger backing for the key Brexit negotiations with the EU.

But while Jeremy Corbyn’s revitalised Labour party picked up support in England, losses for the Scottish National Party to the Conservatives north of the border could just keep Mrs May in power, although there is too much uncertainty still to see clearly the outcome.

Against the dollar, the pound was down 2.1% at US$1.2682, and lost 1.9% versus the euro at €1.1331.

Naeem Aslam, chief market analyst at ThinkMarkets UK Ltd said: “The FTSE is trading strongly higher despite the worst outcome of the UK general election.

“New sessions lows for the pound has been the story for the pound. We had the most toxic outcome out of the UK general elections. But we do know that the pound goes down and the FTSE goes up, this has been generally the trade after the Brexit vote.

“Theresa May has suffered the worst defeat in her political career and  she is expected to speak at 10 a.m. U.K. Markets are not expecting her to resign but many MPs , especially Jeremy Corbyn has called for her resignation.”

FTSE 250 drops

Internationally-focused stocks provided the main boost for the FTSE 100 index as sterling’s fall will boost overseas earnings, with drinks firm Diageo plc (LON:DGE) the top performer, up 3% at 2,351.5p, while luxury goods firm Burberry PLC (LON:BRBY) gained 2.1% at 1,754p, and drugmaker GlaxoSmithKline plc (LON:GSK) added 2% at 1,719.5p.

Energy stocks also rallied having been battered by worries over Tory plans for a price clampdown, with British Gas-owner Centrica PLC (LON:CNA) up 2.4% at 203.5p, and SSE gaining 2.3% at 1,527p.

But although the blue chips made hay, the more domestically-focused FTSE 250 index came under severe pressure, dropping over 112 points, or 0.6% to 19,630.

Housebuilders suffered the most on the uncertainties for the UK, with Crest Nicholson PLC (LON:CRST) the biggest FTSE 250 faller, down 4.4% at 583.5p, while Berkeley Group PLC (LON:BKG) shed 4% at 3,080p.

6.30am: Election outcome still uncertain

The  FTSE 100 index is expected to make a cautious start today as investors wake up to the likelihood of a hung parliament in the UK, with no party seen getting a majority in Parliament following yesterday’s general election.

Sterling dived by 2% in initial reaction to exit polls at around 10pm last night indicating that prime minister Theresa May’s election gamble had back-fired, with her Tory party losing seats rather than gaining a bigger majority to provide a stronger backing for the key Brexit negotiations with the EU

But while Jeremy Corbyn’s revitalised Labour party picked up support in England, losses for the Scottish National Party to the Conservatiives north of the border could just keep Mrs May in power, although there is too much uncertainty still to see clearly the outcome.

Spread betting firm ETX Capital expects the FTSE 100 index to open around 30 points lower at 7,419, having shed 28.64 points yesterday amid the worries on Polling Day.

Neil Wilson, senior market analyst at ETX Capital said “equity markets look to be turning a shade risk-off but with the arithmetic still looking like the Tories can form some kind of government, however shaky, we shouldn’t be looking at a market collapse at the open.”

He added: “A hung parliament is the corridor of uncertainty that markets don’t really like. There is not enough support for a Labour-led coalition but the Tories are going to find it hard to get a working majority.”

The UK benchmark’s early falls could be softened by overnight gains for US and Asian stocks, with the Dow Jones in New York closing 8 points higher to 21,182.52 after seemingly judged the testimony of former FBI director James Comey was not life-threatening to the administration of President Donald Trump.

Comey accused Trump of firing him to try to undermine the investigation into possible collusion by his campaign team with Russia's alleged efforts to influence the 2016 election.

On currency markets, the pound also steadied somewhat after its initial drop versus both the dollar and the euro, down around 1.5% against both at US$1.2752 and €1.1380.

ETX’s Wilson continued: “A technically hung parliament does mean uncertainty but for sterling there is the compelling trade-off with a softer version of Brexit more likely now as Mrs May’s mandate to push through her clean, hard Brexit has evaporated.

“Voters didn’t want to hand her the blank cheque for Brexit. It may leave negotiations in limbo but would also tend to suggest that the downside for sterling is limited. A weakened Tory majority also presents limited upside in the near-term while also this shakes out.”

Beers needed

Given the precarious outcome of the UK general election, investors could well need a drink today, so it is probably apt that brewer-cum-pub landlord, Fuller, Smith and Turner PLC (LON:FSTA) is the only firm scheduled to deliver results.

Back with its interims last November, the boom in craft beers was cited as one of the reasons behind Fullers’ resilient performance, with first-half profits from its Beer Company operation up 8%, although volumes actually dropped 4% in the period.

READ: Craft beer boost for resilient Fullers

For the company as a whole, Fullers’ adjusted first-half pre-tax profit rose by 6% to £22.8mln on an 11% rise in revenues to £197.6mln.

Fullers described it as a “good performance in challenging times” and said the second-half had started well, and shareholders will be hoping that has carried on throughout the year when it unveils its finals.

Analysts are expecting Fullers to report full-year adjusted pre-tax profits of £43.3mln, up from £40.9mln a year earlier, driven by a rise in sales to £379.6mln from £350.5mln.

Significant events expected on Friday June 9:

Finals: Fuller Smith & Turner PLC (LON:FSTA)

AGMs: Deltex Medical Group plc (LON:DEMG); MP Evans Group (LON:MPE); Richoux Group plc (LON:RIC), TomCo Energy Plc (LON:TOM)

UK data: Balance of trade, industrial production, manufacturing production

 Around the markets:

  • Sterling: US$1.2750, down 1.6%
  • Gold: US$1,2173.90 an ounce, down 0.2%
  • Brent crude: US$45.63 a barrel, down 0.2%

City Headlines:

  • M&S Boss to pocket bumper £1.6million pay package despite falling profits at the retailer – Daily Mail
  • BBC report questions BA’s explanation of IT failure – The Times
  • Investors reject plan to list Saudi Aramco with 5% float in London – Daily Telegraph
  • Etihad and Tui’s airline launch is grounded as ‘sums don’t add up’ – Daily Telegraph
  • Amazon Lending challenges banks by offering loans for small business – The Times
  • Matt Zames departure shines spotlight on JPMorgan succession – Financial Times
  • SoftBank soars on deal to buy Alphabet’s robot unit Boston Dynamics – Financial Times
  • Ikea to trial selling products through third parties – The Independent
  • China reports surprise boost in exports but concerns remain over economy – Ther Independent
  • Gordon Ramsay’s Brexit nightmare: chef hires team to halt rising costs – The Guardian

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