LONDON: An opinion poll forecasting a hung parliament in Britain sent shudders through London markets on Wednesday (May 31), launching the pound and stocks onto a roller coaster ride.
British Prime Minister Theresa May found herself fighting to shore up her election campaign after a shock projection by pollsters YouGov forecast the Conservatives would fall short of a majority in next week’s Jun 8 general election.
The pound, which had climbed until recently on the prospect that May would win a landslide in the June 8 poll, giving her a stronger hand in Brexit talks, initially stumbled.
This helped the FTSE 100 stock index strike a record high. Heavy with global firms that do most of their business abroad, a fall in the pound inflates profits, so the pound and FTSE 100 often move in opposite directions.
The pound later recovered and the FTSE 100 ended the day down 0.09 per cent.
“In the UK polls have continued to be the main driver of trading, with the UK markets remarkably sensitive to each individual survey,” said market analyst Connor Campbell at Spreadex.
Another poll put May still ahead with a considerable lead, but this was conducted earlier than the YouGov poll.
“The UK election has become the number one topic on the minds of traders given the narrowing polls,” said Josh Mahony at online trading firm IG.
The pound has slid along with the government’s poll numbers on fears Britain could end up with a bad EU exit deal.
Meanwhile, eurozone stocks ended mixed despite unemployment dipping to 9.3 per cent in April, its lowest level since March 2009, and inflation slowing to 1.4 per cent in May.
Across the Atlantic, Wall Street stocks slid, with the Dow Jones Industrial Average down 0.2 per cent, ahead of Friday’s release of closely-watched US jobs data, which is used as a guide for the Federal Reserve’s plans for interest rate rises.
Asian stocks mostly rose after China’s purchasing managers’ index of manufacturing activity held up in May, beating expectations for a decline.
The reading indicated the sector continues to grow and suggests the economy is feeling the benefits of a pick-up in global demand.
China’s growth slowed to its weakest level in a quarter of a century in 2016. It is expected to ease this year as leaders try to address huge debt piles and switch from trade and investment to consumer demand as the driver of expansion.
“More compelling economic data came out of China, the manufacturing sector expanded more than expected in May, and provided much comfort to investors about the health of the second biggest economy in the world,” noted analyst Naeem Aslam at trading firm Think Markets.
Shanghai, which was closed on Monday and Tuesday for a holiday, ended up 0.2 per cent, Sydney added 0.1 per cent and Seoul was 0.2 per cent higher. Singapore put on 0.2 per cent and Jakarta gained 0.2 per cent.
However, Tokyo ended 0.1 per cent lower and Hong Kong shed 0.2 per cent after a one-day break.