Pound Firms on Eve of UK Election
The pound climbed Wednesday on the eve of the British general election, while European equities dipped ahead of a busy news day that will include an interest rate call in the eurozone and vital testimony from sacked FBI chief James Comey in the United States.
"There's a lot of stuff that people are watching," said William Hamlyn, an investment analyst at Manulife Asset Management, noting that UK investors will "mainly focus" on the snap election.
Despite worries over whether the ruling Conservatives will secure a fresh majority, the pound pushed over $1.2960. But that didn't help the main FTSE 100 stock index, which includes many firms that a strong pound crimps profits, and closed down 0.6 percent.
Frankfurt shares gave up 0.1 percent and Paris slipped 0.07 percent.
Wall Street stocks were flat nearing midday.
Thursday also sees what could potentially be the biggest market-mover -- sacked FBI boss James Comey's testimony on President Donald Trump's suspected campaign links to Russia.
While the European Central Bank isn't expected to raise interest rates at its policy meeting on Thursday, it could signal that its easy-money policy is closer to an end given stronger growth.
Meanwhile speculation Wednesday that the ECB could lower its long-term inflation outlook -- dangerously low inflation was the reason the ECB embarked on its easy-money policies -- led to a brief plunge in the euro.
- Conservative victory? -
Opinion polls predict a win for Conservative Prime Minister Theresa May, but main opposition Labor leader Jeremy Corbyn has gained ground in recent weeks.
Financial markets expect May to triumph, even though the Conservatives' polling lead has narrowed since the start of the campaign.
"I think the markets are definitely pricing in a Conservative win," Hamlyn told AFP.
"If you looked at the polls, you would basically say that markets are being incredibly complacent about the outcome.
"They are certainly not pricing in the odds of a Labor election victory. The polls are split between those that think there is going to be a big Conservative majority, and those that think it is too close to call."
He noted that there was a growing mistrust of opinion polls after they failed to forecast the Brexit referendum last year, the Conservatives' solid victory in May 2015, and Trump's presidential election win last November.
- Nerves over Comey -
"There seems to be a little bit of nervousness in the market over Comey's testimony," added Greg McKenna, chief market strategist at AxiTrader.
"Whether it is geopolitics and the Middle East, worries about James Comey's testimony, the ECB or UK election, traders backed off a little."
Adding to the sense of unease is a brewing crisis in the Middle East, where Saudi Arabia, the United Arab Emirates and Egypt cut off ties and transport links to Qatar, citing its alleged support for extremism.
There are fears the dispute could turn into a wider conflict involving Qatar's ally Iran, with Trump wading into the row in a series of tweets signaling support for Riyadh on the issue.
However oil prices plunged after the U.S. Energy Information Administration said inventories rose by 3.3 million barrels last week, while analysts had expected a decline.
"The oil market has been in decline since the OPEC announcement last month, and now that U.S. stockpiles are rising, we may see a continuation of the decline," said market analyst David Madden at CMC Markets.
- Key figures around 1530 GMT -
London - FTSE 100: DOWN 0.6 percent at 7,478.68 points (close)
Paris - CAC 40: DOWN 0.07 percent at 5,265.53 (close)
Frankfurt - DAX 30: DOWN 0.1 percent at 12,672.49 (close)
EURO STOXX 50: DOWN 0.2 percent at 3,548.40
Tokyo - Nikkei 225: FLAT at 19,984.62 (close)
Hong Kong - Hang Seng: DOWN 0.1 percent at 25,974.16 (close)
Shanghai - Composite: UP 1.2 percent at 3,140.32 (close)
New York - Dow: DOWN 0.2 percent at 21,136.23 (close)
Pound/dollar: UP at $1.2959 from $1.2910 at 2100 GMT on Tuesday
Euro/dollar: DOWN at $1.1252 from $1.1278
Dollar/yen: UNCHANGED at 109.42 yen
Oil - Brent North Sea: DOWN $1.73 at $48.39 per barrel
Oil - West Texas Intermediate: DOWN $2.08 at $46.11
Source: Agence France Presse
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