Pound climbs after Labour’s UK election win

FTSE-100-AFP — London’s benchmark FTSE 100 index gave up early gains made following news that Keir Starmer would become the UK’s new prime minister. (AFP pic)

LONDON:

The pound advanced on Friday after the UK’s centre-left Labour Party clinched an expected landslide election victory to end 14 years of right-wing Conservative rule.

London’s benchmark FTSE 100 index gave up early gains made following news that Keir Starmer would become the UK’s new prime minister, after Labour trounced Rishi Sunak’s Conservatives as Wall Street opened.

Labour’s widely forecast triumph has sparked investor hope of economic stability amid easing inflation, although Starmer faces challenges in the form of strained public finances, a stretched state health service, and flagging economic growth.

“The main beneficiaries of the UK election result were UK housebuilders which gained around 3% on the day while banks and energy companies slid,” said Axel Rudolph, senior market analyst at online trading platform IG.

Paris stocks finished lower ahead of France’s crucial legislative vote this weekend despite tactical voting efforts appearing to have reduced the chances of the far right taking over the government.

Analysts remain wary that the second-biggest economy in the European Union could be headed for a period of political deadlock if there is no overall winner on Sunday.

“After some of the left and centrist candidates pulled out from the elections, the most likely scenario is a hung parliament,” noted research consultancy Oxford Economics.

“France will likely enter a period of uncertainty. This would result in policy paralysis, delaying fiscal consolidation and preventing any meaningful reforms until the next presidential election,” it said.

US jobs data boost

Meanwhile, investor sentiment was given a boost on Friday as softer US labour market data gave the Federal Reserve room to cut interest rates.

Wall Street’s major indices closed in the green, with the Nasdaq and S&P 500 both extending gains after earlier closing at fresh records.

This came after the world’s biggest economy added 206,000 jobs in June, down from the month prior, while the unemployment rate ticked up, the labour department said early Friday. Wage gains moderated as well.

Fed policymakers have held interest rates at the highest levels in more than two decades to stamp out inflation, and a cooler jobs market could ease concerns over its contribution to price pressures.

US treasury bond yields, closely watched as a proxy for interest rates, pulled back after the jobs report on expectations of lower rates.

Briefing.com analyst Patrick O’Hare said: “The key takeaway from the report is that labour market conditions are softening, which will provide the Fed some cover to cut rates in September if it so chooses.”

But weakness seen in the data also sparked some concern over conditions that could translate into lower earnings growth, noted Briefing.com.

Asian stock markets closed mostly lower Friday, a day after Tokyo’s indexes hit record highs.

The yen recovered further against the dollar after this week striking the lowest level in nearly four decades.

Key figures around 2015 GMT

New York – Dow: UP 0.2% at 39,375.87 points (close)

New York – S&P 500: UP 0.5% at 5,567.19 (close)

New York – Nasdaq Composite: UP 0.9% at 18,352.75 (close)

London – FTSE 100: DOWN 0.5% at 8,203.93 (close)

Paris – CAC 40: DOWN 0.3% at 7,675.62 (close)

Frankfurt – DAX: UP 0.1% at 18,475.45 (close)

EURO STOXX 50: DOWN 0.2% at 4,979.39 (close)

Tokyo – Nikkei 225: FLAT at 40,912.37 (close)