London stocks and the British pound jumped yesterday after an election triumph for Conservative Prime Minister Boris Johnson that analysts said will bring clarity to Brexit proceedings and unlock stronger economic growth.
Other European stock markets – although lagging buoyant London, which rose over two per cent at one point – also powered ahead, supported by reports that a US-China partial trade deal is imminent.
Wall Street opened with a slightly softer tone.
“Investors might have two early Christmas presents this week: a phase one trade deal between the US and China, and Brexit getting done,” said Jasper Lawler, head of research at trading firm London Capital Group.
Johnson, whose governing Conservative Party swept to a decisive win, will now push ahead with Britain’s scheduled exit from the European Union on January 31 as he seeks to dispel three years of uncertainty and political deadlock, with a post-Brexit, probably expansionary, budget planned in March.
But he also warned that “as long as there remains the possibility of something like a ‘no deal’, those gains ought to be limited”.
European leaders welcomed also what appeared to be an end to Brexit paralysis, but also warned Britain against becoming “unfair competitor”.
The sheer scale of Thursday’s victory – the biggest Conservative majority since Margaret Thatcher’s heyday in the 1980s – sent the pound soaring to an 18-month dollar peak and to highs against the euro not seen since the June 2016 Brexit referendum.
Investors expressed relief that Johnson roundly defeated main opposition leader Jeremy Corbyn’s Labour Party – which had vowed to renationalise formerly state-owned companies.
“The threat to businesses from the Labour policies has been removed and there has been a collective sigh of relief,” said Maurice Pomery, founder of trading group Strategic Alpha.
The pound held at elevated levels on Friday but pulled back somewhat from the multi-month peaks forged overnight.
Global investor sentiment was given another shot in the arm by reports that Beijing and Washington have reached a long-awaited trade deal.
US President Donald Trump is nearing a long-awaited pact between the world’s economic superpowers that will see the cancellation of fresh US tariffs due at the weekend and the rolling back of previous measures, they said.
After months of high-level talks, negotiators presented the president with a deal that will see China ramp up its purchases of agricultural goods, Bloomberg News reported.
Trade tensions between the world’s biggest economies have been a huge drag on global growth, with most countries being sucked into the stand-off, sending some into or close to recession.