Dubai - The pound tumbled as the UK’s ruling Conservative Party lost its parliamentary majority, plunging the country into uncertainty just days before Brexit negotiations were due to start. Crude advanced and the dollar strengthened.
Sterling dropped the most in five months as the election intended to strengthen Prime Minister Theresa May’s hand in negotiations with the European Union instead left her battling to survive.
The currency’s retreat gave the British benchmark stock index a boost, but the election’s impact beyond the UK was muted. The euro extended losses to three days, and the Stoxx Europe 600 Index fluctuated. Fears of a supply glut continue to weigh on oil, but it managed to reverse an earlier decline.
While fallout from the election is roiling British assets, investors may be relieved about its limited impact elsewhere. The vote capped a series of major events this week that had the potential to change the tone of financial markets globally, most of which passed with relatively little fuss.
Attention will now turn to the week ahead, when the Fed is expected to raise interest rates and the Bank of England, the Bank of Japan and the Swiss National Bank also meet.
“For now, the results of the UK elections do not appear to be threatening the global growth story,” Mark Haefele, global chief investment officer at UBS, said in a note to clients. But for Britain,“political uncertainty is likely to more than offset any benefit from a marginally weaker pound,” he said.
Here’s what investors will be facing next:
French voters go to the polls over the weekend, this time as part of a two-step process for parliamentary elections. The outcome will decide how much control new President Emmanuel Macron will have to enact his legislative agenda.
Federal Reserve policy makers are forecast to raise their benchmark interest rate for the second time this year at the conclusion of a two-day meeting next week. Central banks in Japan and Britain are also scheduled to weigh in with policy decisions.
Here are the main moves in markets:
Currencies
The pound weakened 1.5% to $1.2766 at 13:23. The yen retreated 0.3% to 110.38 per dollar. The euro slipped 0.3% to $1.1179. The Bloomberg Dollar Spot Index added 0.4%, gaining for a third day.
Stocks
The FTSE 100 Index climbed 0.4%. The Stoxx Europe 600 Index swung before trading 0.2% lower. Futures on the S&P 500 added 0.1%. The underlying gauge advanced less than one point on Thursday, for a second day of gains.
Bonds
The yield on 10-year Treasuries rose one basis point to 2.20%. UK gilt yields dropped three basis points after climbing three basis points on Thursday. German bund yields were flat at 0.25%. French 10-year yields dropped two basis point.
Commodities
West Texas oil gained 0.2% to $45.71 a barrel, after two days of losses. Crude has slumped this week as an unexpected increase in US crude stockpiles cast doubt on OPEC’s ability to rebalance world crude markets. Gold fell 0.3% to $1 273.97 an ounce, declining a third day.
Asia
Japan’s Nikkei 225 Stock Average jumped 0.5%. SoftBank rallied 7.4% to the highest in 17 years after agreeing to buy Boston Dynamics from Google parent Alphabet.
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