LONDON: The pound plunged Friday as Prime Minister Theresa May's Conservatives lost their parliamentary majority in Britain's general election, fuelling political uncertainty just days before the start of Brexit talks, but Wall Street shot to record highs as Donald Trump hit back at his critics.
Sterling slumped to a seven-week low of $1.2636, while the euro reached a seven-month peak at 88.59 pence.
However, that propelled the London stock market higher as the weaker pound boosts multinational companies that earn in currencies other than sterling. Investors also brushed off news of a monthly rise in industrial output.
May had called Thursday's snap vote in a bid to boost her Conservative party's hold over parliament and give her a stronger hand in upcoming talks with EU leaders over the country's detachment from the bloc.
But leftist Jeremy Corbyn's Labour Party slashed the Conservatives' lead, leaving the country with a hung parliament.
That means that no single party has the 326 seats required for an absolute majority. May's Conservatives will now rely on the support of Northern Ireland's Democratic Unionist Party (DUP) for a working majority.
- 'Pall of uncertainty' -
"The FTSE was up... as sterling fell after the Conservatives lost their majority in the Commons," said Russ Mould, investment director at stockbroker AJ Bell.
"Prime Minister Theresa May's gamble on a snap election to give her a strong mandate for Brexit talks failed, casting a pall of uncertainty over the forthcoming negotiations."
With one constituency still to be declared, the Conservatives were on 318 seats -- down from 331 at the 2015 general election -- while Labour was on 261, up from 229.
"In many ways a hung parliament is the least market-friendly result because it creates uncertainty and could be the biggest delay to the start of Brexit negotiations," said market analyst Jasper Lawler at London Capital Group.
"Arguably the (market) reaction has not been as extreme as the result" of the elections, he added.
The election outcome throws Britain once again into upheaval less than a year after the country's decision to leave the EU, which had already led the pound to collapse about 15 percent against the dollar between June and October 2016.
"We may be in turmoil politically but the FTSE is finding some upside after a night of drama," added analyst James Hughes at trading firm GKFX.
"A weaker pound helps to boost companies publically quoted in the UK and props up the equity markets."
Elsewhere on Friday, French and German equities also advanced after a broadly positive session in Asia.
- Wall Street hits records -
Meanwhile Wall Street's main stock indices hit record highs as investors shrugged off the dramatic congressional testimony of sacked FBI boss James Comey on Thursday in which he said President Trump asked him to drop a probe into former national security advisor Mike Flynn.
"The Dow Jones and S&P 500 hit record highs today as traders are clearly not worried about accusations made by the former head of the FBI, James Comey, about President Trump," said market analyst
Trump on Friday claimed "total and complete vindication" after Comey revealed he was not personally under investigation in a probe into Russian interference in last year's US election.
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