LONDON: London stocks plunged on Tuesday, dragging Europe lower after Britain called a snap general election, fuelling political uncertainty ahead of Brexit but also a tight presidential race in France.
Indices were hit also by falling metals prices, traders said, as investors returned to their desks after a four-day Easter break.
At the close, the London FTSE 100 index of leading shares had slumped 2.5 per cent as miners and banks suffered while the Paris CAC 40 shed 1.6pc and Germany’s DAX lost 0.9pc, despite a 28pc rise in first quarter profits at car giant Volkswagen.
The FTSE’s dive was its biggest one-day fall since last year’s referendum vote to leave the European Union.
But the pound rose to a four-month high, hitting the value of multinationals.
In New York, the Dow Jones index slipped 0.7pc two hours into trading.
In a surprise announcement, British Prime Minister Theresa May earlier called for an early general election on June 8 as Britain prepares for delicate negotiations on leaving the European Union by 2019.
“May has surprised markets,” said David Cheetham, chief market analyst at XTB trading group.
“The pound has recovered from some earlier jitters when news of a statement from the PM sent sterling falling.” British finance minister Philip Hammond hailed sterling’s surge.
Hammond said May’s decision to call a vote which early polls suggest her Conservatives will win handsomely demonstrated “the confidence that the markets have” in her administration.
Jasper Lawler, senior market analyst with London Capital Group, said that “the kneejerk positive reaction in the British pound to the snap election aligns with our view sterling has seen its worst.” He added: “Markets have accepted Brexit so a snap election should just help Theresa May’s chances of getting a better deal for the UK” after it leaves the EU bloc.
Sterling, which has lost some ten percent of its value since last year’s surprise referendum vote to leave the EU, added 1.6 percent to hit a ten-week high to the dollar of 1.2762 by the times London closed.
Published in Dawn, April 19th, 2017
