Pound and FTSE 100 edge up after Labour landslide
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The British currency stayed stable and the top stock market index in London slightly increased as investors remained calm following Labour's surprising win on Friday morning.
Experts say that most of the expected impact of the election has already been factored into the financial markets. As a result, there was a subdued response to the election outcome as investors are hopeful that the new political era will bring stability and tranquility.
The value of the British pound rose slightly by 0.1% to 1.278 US dollars, reaching its highest point since mid-June. It also increased by 0.01% to 1.180 euros. Meanwhile, the FTSE 100 Index went up by 0.2%, or 16.2 points, to 8257.5 in the early trading hours of Friday.
Home construction companies were at the forefront of the FTSE 100 as the overwhelming victory of the Labour party was seen as a positive for the industry. There is optimism that regulations around planning will be reduced, allowing for more construction projects and increased housing availability.
Victoria Scholar, the person in charge of investments at interactive investor, stated that the calm atmosphere in the financial markets is due to the fact that the overwhelming victory of the Labour party was expected based on polling data and had already been taken into account when determining market prices.
In comparison to Liz Truss's unsuccessful economic plan in 2022, which caused bonds and the pound to fall, today's calm market and lack of dramatic price changes indicate that investors and traders view the recent election results as a positive step towards a new era of political stability and peace.
Analysts have stated that market focus will shift towards the upcoming State Opening of Parliament and the King's Speech on July 17, along with the potential impact of new policies being introduced. Additionally, there is speculation about the likelihood of an interest rate decrease in August.
Susannah Streeter, who leads the money and markets team at Hargreaves Lansdown, mentioned that the new administration may initially experience a period of positivity, but tough choices will eventually need to be made during their time in office.
The large margin of victory and the increase in support for smaller political parties and independent candidates is causing worry among Labour Members of Parliament about their chances of being reelected in the next election.
"They understand the importance of meeting the needs of the voters, but may struggle as they are dedicated to being financially prudent and limiting expenses."
The main focus will be on maintaining stability in the markets during the initial period of the new administration, without making excessive spending commitments.
Persimmon, a builder in the FTSE 100, was the top performer as stocks rose due to positive expectations regarding planning changes under the new Labour Government. The company's stock went up by over 3% in early trading.
Another home construction company, Vistry, experienced a 3% increase in their stock value. Barratt Developments and Taylor Wimpey also saw strong growth, with both companies' stocks rising by 2% in the UK's main stock index.
However, banks were one of the sectors experiencing declines at the beginning of the trading day. HSBC had the largest decrease in the FTSE 100 index, dropping by 1.3%, while Standard Chartered also saw a decrease of nearly 1%.
Industry professionals have stated that traders will now probably turn their attention to the upcoming second round of the French elections. This event has had a significant impact on European financial markets in the past few weeks.
The nation is set to have its general election this Sunday, following the far-right National Rally party's success in the initial round of the unexpected parliamentary elections.
