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What’s happening: UK stocks edged higher on Thursday, as millions headed to cast their ballots to elect the country’s next Prime Minister.
What happened: Market sentiment was supported by exit polls predicting a clear majority for the Labour Party, led by Sir Keir Starmer.
European stock indices also climbed on Thursday, with the CAC 40 outperforming ahead of the French elections on Sunday.
Why it matters: Although the counting of votes continues, the Labour Party has already won 326 of the 650 seats in the British parliament, securing the number needed to govern with a majority.
Exit polls suggest the Labor Party could cross 400 seats, in a historic victory over the Conservatives, which has held power for 14 years, taking the country through Brexit and the pandemic.
Voting across the UK continued from 7am to 10pm local time on Thursday, with an estimated 46 million registered voters casting their ballots in around 40,000 polling booths.
UK stocks climbed, extending gains of 0.62% at the close of the previous trading session, amid speculation of a landslide win for the.
The turbulent 14 years of the Conservatives being at the helm had five prime ministers come and go in eight years. The Labor Party’s election campaign was built around higher public investments and a pro-business stance to create jobs and trigger sustainable economic growth.
With optimism around “change”, markets shrugged off disappointing economic data releases by the UK. The country’s S&P Global construction PMI fell to 52.2 in June, from 54.7 in May. Although this marked the fourth month of growth in construction activity, the figure came in below forecasts of 53.6. UK’s new passenger car registrations rose by 1.1% year-on-year to 179,263 in June. This represented a slowdown from the 1.7% growth recorded in May.
The FTSE 100 rose 0.86% to close at 8,241.26 on Thursday. The STOXX Europe 600 Index added 0.56% to finish trading at 517.54, while the DAX 30 added 0.41% to reach 18,450.48.
French stocks outperformed their European peers, with opinion polls predicting the National Rally falling short of a majority in Sunday’s parliamentary elections. The CAC 40 climbed 0.83% to settle at 7,695.78.
What to watch: Investors will continue monitoring the French elections. New policies being introduced by the UK’s Labour Party will also be in focus.
Markets will watch the speech by Bank of England’s James Benford.
Context: The US dollar index fell on Thursday, after data showed more people filing for initial jobless claims.
Details: The US reported a rise in initial jobless claims by 4,000 to 238,000 in the week ending June 28. The figure came in much worse than market expectations of 235,000. Continuing unemployment claims rose by 26,000 to 1,858,000 in the week ending June 22, reaching the highest level since November 2021.
Market sentiment was also hurt by the country’s ISM services PMI coming in at 48.8 in June, following 53.8 in the previous month. This not only came in worse than the consensus estimates of 52.5, but also marked the steepest contraction in services activity since April 2020.
Concerns around economic stability in the US stroked speculations of the Federal Reserve beginning to cut its benchmark interest rate soon. An interest rate cut makes investments less attractive for foreigners, exerting pressure on the domestic currency.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined 0.27% to 105.12 on Thursday, after shedding around 0.33% in the previous trading session.
What to watch: Investors await the release of the NFP report from the US today. The US economy is expected to add 190,000 jobs in June, significantly lower than the 272,000 job adds reported in May. The country’s unemployment rate is forecasted to remain steady at 4% in June.
Other Markets: Asian indices closed mostly higher on Thursday, with the Asia Dow, Nikkei 225, Hang Seng and Sensex up by 1.49%, 0.82%, 0.28%, and 0.08%, respectively, and the Shanghai down by 0.83%.
Russia got closer to taking over the key Donetsk region, with Ukraine’s army retreating from Nazar Voloshyn. The news sent the RUB/USD higher in forex trading this morning.
Brazil’s trade surplus contracted by 33.4% year-on-year to $6.71 billion in June. Despite the plunge, the figure exceeded market expectations of $5.8 billion, resulting in high volatility in the BRL/USD forex pair.
South Korea recorded a current account surplus of $8.92 billion in May, versus a deficit of $0.29 billion in April. This being the largest surplus since September 2021 sent the KRW/USD higher in forex trading this morning.
Japan’s household spending declined by 1.8% year-on-year in May, after 0.5% growth in the prior month. Although the figure missed market expectations of 0.1% growth, the JPY/USD forex pair recovered slightly from last month’s downtrend.
Indonesia’s foreign exchange reserves grew to $140.2 billion in June, from $139 billion in the previous month. The figure beating market estimates of $140 billion sent the IDR/USD higher in forex trading this morning.
Russia’s foreign exchange reserves, Canada’s Ivey PMI, Turkey’s treasury cash balance, ECB President Lagarde’s speech and Argentina’s industrial production.
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