US stocks hit records, pound slides on UK vote

The British pound plunged to a seven-week low on Friday after a shock election result cast doubt on Britain’s talks to leave the European Union, but global equity markets rallied with key indices on Wall Street hitting new record highs.
 
British Prime Minister Theresa May said she would form a government backed by a small Northern Irish party after her Conservative Party lost its parliamentary majority in a vote on Thursday just days before the EU departure talks begin.
 

Source: Bloomberg

After an initial plunge, sterling pared losses against the dollar and euro, while the dollar gained. Safe-haven gold and prices of US Treasuries drifted lower. The pound shed more than 2 per cent against the dollar, dropping to $1.2636 before trimming losses.
 
The impact of the British election on the US markets was limited. “Markets are celebrating gridlock again, which is a reversal of what we saw after the US election,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
 
Ablin said over the past 12 months, central banks, including the Federal Reserve, have pumped almost $2 trillion into capital markets, which has driven asset prices higher.
 
“If there’s one metric that I’m going track, to determine whether or not I want to stay engaged in risk-taking, it’s going to be that liquidity. If I get a sense the Fed or other central banks will start to close up shop on that, we’re going to reduce risk,” Ablin said.  Equity market rallied, with European shares closing higher after early signs of skittishness. Britain’s FTSE 100 index rose one per cent, and the pan-regional FTSEurofirst 300 index of leading European shares rose 0.36 per cent to 1,534.20.
 
MSCI’s all-country stock world stock index gained 0.27 per cent.
 
Stocks on Wall Street set new intra-day highs. The Dow Jones Industrial Average rose 98.34 points, or 0.46 per cent, to 21,280.87. The S&P 500 gained 10.14 points, or 0.42 per cent, to 2,443.93 and the Nasdaq Composite added 3.30 points, or 0.05 per cent, to 6,325.06.
 
The dollar rose to a 10-day high against a basket of currencies. The dollar index, which tracks the greenback against six major rivals, was up 0.42 per cent at 97.322.
 
The euro was down 0.24 per cent to $1.1185 against the dollar, a day after the European Central Bank closed the door on more interest rate cuts.