FTSE 100 sheds 2.5% on UK election sterling rally

By John Kenchington

Added 19th April 2017

The FTSE 100 index suffered its worst fall since the aftermath of Brexit yesterday, after Prime Minister Theresa May called a snap general election.

FTSE 100 sheds 2.5% on UK election sterling rally

The index plunged as markets weighed up the threat of the sharp rise in sterling, resulting from the election announcement, would reduce overseas demand for British exporters.

Sterling rocketed as polls suggested the Conservatives would win the 8 June election in a landslide and gain a large majority in parliament – enough to drive home the UK’s Brexit negotiations successfully.

The currency rose to four-month highs against the dollar in the wake of the election calls. The prime minister requires a Parliamentary vote to call an election on 8 June but this is widely expected to pass.

Kames Capital chief investment officer Stephen Jones said sterling was a barometer of sentiment and its rise suggested the market welcomed the election, in spite of the equity fall.

“An assumed new full-term of a government, with a clear mandate around Brexit, a pro-business agenda and some fiscal caution seems to play well,” he said.

He added it was “not surprising” major exporters on the FTSE 100 had fallen in response to the sharp rise in sterling.

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