Stocks And Sterling Suffer Over Political Uncertainty
CMC Markets | Jun 12, 2017 10:16
In London, the FTSE 100 is in the red as political uncertainty still hangs over the market due to the hung parliament. Theresa May is scheduled to meet Arlene Foster of the Democratic Unionist Party (DUP) tomorrow to begin talks about the possibility of the Northern Irish party providing political assistance to the Conservatives in order to keep them in power. The DUP are opposed to having a hard border on the island of Ireland, and the Scottish Tories are against a hard Brexit, so whatever deal is reached in the next few weeks, it could lean more towards a soft Brexit.
The FTSE 250, which is a better measure of the UK economy, is under-performing the FTSE 100. A survey from the Institute for Directors (IoD) has shown that business confidence has dropped dramatically due to Tories failure to hold onto their majority.
Ryanair (LON:RYA) shares are a touch lower this morning even though Barclays (LON:BARC) raised their price target to €20 from €18.20.
Despite projections that French President Emmanuel Macron is on track to achieve a majority in the parliamentary election, the CAC 40 is down 0.5%. Mr Macron’s La Republique en Marche and the MoDem’s are tipped to win up to 445 out of the 577 seats.
The pound is lower versus the US dollar and the euro because traders are still concerned the lack of political clarity from the UK. The possibility of the Tories doing a deal with the DUP has brought some stability to sterling, but until an agreement has been locked in, traders will remain cautious.
In the US, we are expecting the Dow Jones to open 45 points lower at 21,226 and the S&P 500 to open at 2424, down 7 points. The US federal budget for May will be revealed at 7pm, the consensus is for a deficit of $87.8 billion, and that compares with a surplus of $182.4 billion in April.
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