LONDON: The pound advanced on Friday after Britain’s centre-left Labour Party clinched an expected landslide election victory to end 14 years of right-wing Conservative rule.
London’s benchmark FTSE 100 index gave up early gains following news that Keir Starmer will become Britain’s new prime minister after Labour trounced Rishi Sunak’s Conservatives as Wall Street opened flat following stronger-than-expected data on the US jobs market.
Labour’s widely-forecast triumph has sparked investor hope of economic stability amid easing inflation, although Starmer faces tough challenges in the form of strained public finances, a stretched state health service and flagging economic growth.
Frankfurt and Paris stocks climbed Friday with eurozone investors on tenterhooks before France’s crucial legislative vote this weekend.
Kathleen Brooks, research director at trading firm XTB, said that once Labour takes power “focus will quickly shift to political issues elsewhere.”
“The second round of French elections take place on Sunday. Financial markets in France are calm ahead of the vote,” she added.
In France, tactical voting efforts to block the far-right from taking over the government have partly bolstered eurozone markets.
But analysts remain wary that the second-biggest economy in the European Union could be headed for a period of political deadlock if there is no overall winner on Sunday.
“After some of the left and centrist candidates pulled out from the elections, the most likely scenario is a hung parliament,” noted research consultancy Oxford Economics.
“France will likely enter a period of uncertainty. This would result in policy paralysis, delaying fiscal consolidation and preventing any meaningful reforms until the next presidential election.”
Investor sentiment had been given a boost Thursday as softer US labour market data gave the Federal Reserve room to cut interest rates.
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