8th May 2015 09:38
LONDON (Alliance News) - London stock indices continue to surge higher mid-morning Friday, with the pound also rising, on optimism of a Conservative government, as the Tories head towards a slim outright majority in the UK General Election.
With the vast majority of seats declared in the 2015 UK General Election, the Conservatives are set to secure an outright majority, defying pre-election polls which had forecast a race which would be too close to call, with Labour leader Ed Miliband expected to resign following the results.
With 635 of 650 seats now in, the Tories have secured 320 seats, leaving them only six seats short of an outright majority of 326. The BBC is forecasting the party will surpass that mark, predicting it will win 329 seats.
Labour is currently on 228 seats, having so far lost a net 26 seats, the vast majority of which came in Scotland where the Scottish National Party surged to win 56 seats, a gain of 50 from the last time around. The BBC has reported that Ed Miliband, the Labour leader, is set to step down in the next few hours following the disappointing outcome for his party.
UK stock indices soared higher at the open, cheering the likelihood of a Conservative victory. At mid-morning, the FTSE 100 trades up 1.8% at 7,007.48, the FTSE 250 is up 3.1% at 17,982.30, having hit a new record intraday high of 18,161.81 earlier in the session. The AIM All-Share index trades up 0.2% at 750.30.
"For the best part of 12 months the following sectors of transports, utilities, banking and house builders have been weighed down by concerns that the Labour Party's manifesto promises would kill investment incentives as well as threaten dividends for the companies in question," says Michael Hewson, chief market analyst at CMC Markets.
"This morning's realisation that none of these measures will come to pass has seen the market rebound like a coiled spring, and a cloud lifted on a number of important UK sectors with the FTSE250 hitting a record high in the process and seen the stocks in question rebound strongly," Hewson adds.
In the FTSE 100, only Pearson trades lower, down 0.3%, and support services company Babcock International Group is the best performer, trading up 7.5%. Also amongst the best performers are banks, housebuilders and utility companies.
Only a handful of stocks trade lower in the FTSE 250 as well, with Ladbrokes the top gainer, up 10%. The bookmaker's shares are rallying as the prospects of Labour's policy for a levy on fixed odds betting machines dissolve.
However, despite the rally in stocks and the pound, analysts also caution that a Tory government brings about the risk of a European Union referendum and the threat of a so-called Brexit. Furthermore, the strength of the Scottish National Party raises questions about the possibility of a second referendum on Scottish independence.
"Uncertainties which are here to stay are the Brexit discussion and more autonomy for Scotland. We still expect an EU referendum sometimes in late 2017 which fuels the Brexit discussions. However, current polls suggest that the UK will rather stay in the EU than leave it," say Christoph Riniker, Head Strategy Research, Julius Baer and David Alexander Meier, Senior Economist, Julius Baer.
"With the very positive outcome for the SNP yesterday, discussions about more autonomy in any form for Scotland are most likely going forward. In contrast to the EU referendum this will be rather a near term event to be taken care of by the government," they add.
In other stock news, Just Eat is the biggest of the few FTSE 250 decliners, down 8.4%. The online takeaway operator said it will buy Australian online takeaway company Menulog Group Ltd for AUD855 million, financed from the proceeds of an equity issue, a move that expands its reach into both Australia and New Zealand.
The equity fundraising is expected to be launched in mid- to late-May, following receipt of the approval of the acquisition by the Foreign Investment Review Board in Australia. Completion of the equity fundraising is expected early to mid June.
BG Group said earnings and revenue in the first quarter of 2015 were substantially hit by the fall in the oil price which caused a poor performance from its production and exploration division. The FTSE 100-listed oil producer, which is being acquired by Royal Dutch Shell, said its pretax profit for the three months to end-March was USD708 million, down from USD1.89 billion a year earlier.
The oil producer reported earnings before interest tax, depreciation and amortisation in the quarter of USD1.59 billion, down over 40% from the USD2.71 billion reported a year earlier, whilst earnings before interest and tax more than halving to USD945 million from USD1.97 billion. BG shares trade up 0.9%.
InterContinental Hotels Group reported growth in global revenue per available room in the first quarter of 2015, boosted by a strong performance in all of its operating regions, as it continues to expand its pipeline with the highest number of first quarter hotel signings in seven years.
The hotel operator, which owns brands including Holiday Inn, Crowne Plaza and InterContinental Hotels, said global revenue per available room grew 5.9% in the first quarter, driven by an increased rate of 3.4% and growth in all four of the regions it operates in. IHG trades up 0.9%.
Still ahead in the economic calendar is US nonfarm payrolls, wage and unemployment data at 1330 BST.
Futures indicate Wall Street will open higher, with the DJIA and S&P 500 both pointed up 0.1% and the Nasdaq 100 pointed up 0.2%.
By Neil Thakrar; [email protected]; @NeilThakrar1
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