FTSE Responds to Election Results

The FTSE 100 made some modest gains during the early hours of trading on Friday, following the shock election result which left the UK faced with the prospect of a hung parliament. The FTSE 250, meanwhile, shed 0.3 percent, as investors were pessimistic about the future of the economy.

shareprices.com - Sunday, June 11, 2017

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The pound has slipped slightly, and this helped many FTSE 100 listed companies, which take their earnings in foreign currency. The Conservative Party won 318 seats, but to have majority rule a party needs 326 seats, so the Conservatives are forming a government with the Democratic Union Party.

The Sterling fell by two percent against the dollar - the weaker pound is expected to have a positive impact in the medium term, but this is a temporary influence and other fundamentals could kick in over the next few weeks.

Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management noted that she expects that the continued uncertainty will leave the pound under ongoing pressure. The UK is running with a significant deficit in its current account at this time, and the uncertainty could weigh on household spending over the coming months. At this stage, the FTSE 250 is likely to remain under pressure, but the FTSE 100 still stands to benefit from weakness in the pound and this is shown in how companies such as Fresnillo and Randgold Resources are making gains - while UK focused banks and housebuilders are going through a more difficult time at the moment.


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