Fears of a Corbyn-led coalition worry the markets: Pound and UK-focussed shares wobble on hung parliament concerns
- The mere whiff of a Jeremy Corbyn-led coalition sent shockwaves around City
- Trust and student accommodation provider Unite Group among the big fallers
- Sterling was also under pressure and the FTSE 100 endured a rollercoaster ride
Fears of a hung parliament are stalking financial markets after a key index of UK-focused firms slipped yesterday.
Investors were stunned by the latest poll from Yougov which indicated the Conservative lead over Labour is narrowing, and a hung Parliament remains a possibility.
The prospect of political stalemate – and the whiff of a Jeremy Corbyn-led coalition with the SNP – sent shock waves around City trading floors and unnerved ordinary investors.
Britain’s next PM? The mere whiff of a Jeremy Corbyn-led coalition with the SNP – sent shockwaves around City trading floors and unnerved ordinary investors
The second-tier FTSE 250, which contains more domestic focused companies than the FTSE 100 and is seen as a bellwether of the UK economy, shed 133.98 points, or 0.65 per cent, to 20,647.11
Among the big fallers – down at least 3 per cent – were two firms with big exposures to the property market – Newriver Real Estate Investment Trust and student accommodation provider Unite Group.
Sterling was also under pressure and the FTSE 100 endured a roller-coaster ride as investors bet on the result of the election. The blue-chip index ended up slightly, by 2.49 points to 7216.25.
Russ Mould, investment director at AJ Bell said: ‘Polling, which suggests a hung parliament is still a credible outcome, saw falls for sterling and UK-focused stocks as markets reacted to the threat of renewed uncertainty.
‘The multi-national FTSE 100 trades higher but the more domestic FTSE 250 is under pressure as investors nervously await the results of the big vote.’
Investors scrambled to protect themselves against a fall in the pound, as experts predicted a sharp drop in sterling if there is even a glimmer of a chance that Labour wins today.
One-week risk reversals in the pound against the dollar – a measure of the premium required to protect against a fall in the currency – has risen sharply over the past week.
Investors were stunned by the latest poll from YouGov which indicated the Conservative lead over Labour is narrowing, and a hung Parliament remains a possibility
This barometer is running at its highest level since the 2016 EU referendum, when the shock Brexit vote triggered a dramatic drop in the value of the pound.
Neil Wilson, from Markets, predicted those prepared to bet on sterling could reap the rewards, saying: ‘While there is a risk of a buy-the-rumour, sell-the-fact trade at work, there should also be a bit more upside should the Conservatives secure a strong majority – a Boris Bounce perhaps.’
The pound was hovering around $1.32 before sinking as much as 0.76 per cent to just above $1.31 after the Yougov poll was published on Tuesday.
Against the euro it fell as much as 0.7 per cent from €1.1899 to €1.1816.
But sterling then rallied back towards $1.32 and €1.19.
The forecast of more violent swings over the next few days means there is plenty of money to be won – and lost.
Currency traders are preparing to work through the night long after the exit poll is published at 10pm.