Wednesday, 19 April: MPs voted overwhelmingly for a snap election by 522 votes to just 13 today, on the back of yesterday’s spontaneous General Election announcement. A snap online ICM poll released hours after yesterday’s announcement indicated Conservative support at 46%, Labour at 25% and Lib Dems at 11% of a sample of 1000 people. A Conservative majority is predicted which is expected to: i) lend itself to a “clean” faster Brexit without impeding on a 2020 General Election, ii) dilute the influence of MPs pushing for a hard Brexit, strengthening the government’s domestic political position and allowing compromise over key EU demands for a transitional agreement, and iii) strengthens May’s overall negotiating stance with the EU.
On the basis of the aforementioned it is logical to see why sterling rallied yesterday and continues to display strength intraday, holding onto the majority of gains against the euro and the dollar. On the back of which, stocks in the FTSE 250 index have enjoyed a day of gains(+0.62%) as investors sought sterling, domestic-facing earners. Consumer stocks such as Dunelm(+4.50%), Dixons Carphone(+4.31%) and Card Factory(+2.75%) were some of the household names in the green. Contrarily, the FTSE 100 started lower and closed out the day -0.46% as overseas earners weighed heavily, as did Burberry(-5.45%) with investors dumping the stock on underlying growth worries. This sees the primary index down 2.91% for the week.
The UK received another vote of confidence from the IMF, after currency traders saw yesterday’s shock announcement pertaining to a ‘soft’ Brexit. The IMF raised its forecast for UK growth this year to 2% up from a prediction of 1.5% in January, representing the largest upgrade of any major economy. Therefore, the UK is expected to grow at a faster rate than France, Germany, and all other G7 economies United States aside. Higher inflation is expected to curb consumer spending paring back growth to 1.5% next year, at the same rate as Germany. The IMF growth assumptions are predicated on smooth negotiations with Brussels that are expected to ‘proceed without raising excessive uncertainty’ and ‘eventually settle in a manner that avoids a very large increase in economic barriers’.
At the close, European indices were mixed, with the FTSE 100 -0.46%, the DAX 30 +0.13% and the CAC 40 +0.27%.