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Live: Reactions to UK hung parliament election result

Gold Made Simple will be updating this thread throughout the day with all the relevant investor and City reaction to the election result.

Carolyn Fairbairn, director-general at the Confederation of British Industry, on the forming of a new government:

“With a new Government, there has never been a more important time to refocus on the economy and plan with confidence and ambition. The next Government needs to deliver an open, competitive and fair post-Brexit economy that works for everyone across all our nations and regions.

“This can only be achieved if the next government doesn’t put the brakes on business, remains open to the world and sets out a pro-enterprise vision.

“We need to move much faster to fix the foundations of the UK economy and our productivity problem. We need meaningful progress on a modern industrial strategy by the end of the year, with real change on the ground on skills, infrastructure and innovation.

“With only ten days before Brexit talks begin, the UK needs to be fast out of the blocks. Agreeing transition arrangements and guaranteeing EU citizens’ rights should be early priorities to get the talks off to a good start and show to the world that trade and people come first.

“Firms will support the UK develop our inclusive, innovative and open economy. More than ever, the new Government must work together with business to make the most of the opportunities ahead. Firms can provide the evidence, ideas and solutions from the shop, office and factory floor to secure our future prosperity.”

 

Tony Dobra, executive director at Baird & Co.:

“Sterling headed higher this week and investors expected it to get stronger still as the polls pointed to a convincing Tory win. Investors who paid for their gold in sterling would be nursing losses if the pound strengthened further against the dollar. So they sold, which means many will have lost money following the currency correction we saw overnight.

“Now we’re seeing some of those sellers buy back in – often at a loss- as political reality sets in. Investors and markets dislike nothing more than uncertainty and the election results has given us this in buckets. We anticipate a strong rebound in demand for physical gold as buyers seek out a haven investment.”

 

Lee Robertson, CEO at Investment Quorum:

With a result of a hung parliament we will see more volatility in markets over the coming days and quite possibly mixed messages from them.  For example, sterling has taken a battering on the result but conversely the FTSE has risen on the news. This serves to underline the need for investors to remain calm and trust that their investment strategies which have been built with a long term view and to be as resilient as possible to short term market shocks.

Until we see how the political landscape develops and the potential for coalitions of the willing on both sides of the divide, it is incredibly important that investors and their advisers carefully consider any actions before taking them. A fall in sterling will assist UK exporters and will very probably continue to drive markets. Equity investors typically understand that over longer investment terms it is nigh on impossible to factor in political events and it is virtually always more sensible to stay the course.

Over the longer term investment decisions around asset and geographical allocations may need to be taken to cope with market movements and the mood music around Brexit, the Middle East crisis and US politics but these are strategic decisions and not short term tactical response decisions.

 

Bruce Davis, co-founder and managing director at Abundance:

“Today’s election result is a wake-up call to anyone who thinks the public’s views can be taken for granted. Whether a political party or a major financial institution, empty soundbites with no substance don’t work anymore – whether claiming strength and leadership where there isn’t any, or advertising savings accounts that pay 0.1% interest. The Brexit referendum taught people that their views do matter, and now more of us are demanding ours are heard and dealt with properly.

“Democratic finance is expanding and becoming mainstream, giving people good returns at low cost, and in our own case, from investments that match people’s ethical values as well. The days of the financial establishment offering nothing but soundbites and taking our money for granted are numbered.”

 

 Ross Norman, CEO Sharps Pixley:

“A sharp decline in sterling is a big win for British gold buyers and only today the price has risen above the important £1,000 per ounce level.”

“Gold in sterling has risen by 470% since 2000, that’s over 11% a year compounded – that’s about three times the average UK property over the last 16 years.”

Sharps Pixley report they have been inundated with investor interest with a 252% increase in gold demand year-on-year (May 2016 vs May 2017) ; the business has run out of some bullion products and they are again flying in fresh metal from Switzerland and Germany in order to replenish stocks.

 

Garry White, chief investment commentator at Charles Stanley:

“Sterling has fallen on the prospect of a hung parliament. Many believe that uncertainty will complicate talks over ‘Brexit’ and it is also possible that Mrs May could now face a future leadership contest, but these worries seem overdone as the process takes about three months and it would be a brave move to call such a contest and delay the start of Brexit talks. The DUP are likely to support the Conservatives, so it is likely that there will be a continuing Conservative government headed-up by Mrs May.

“This does not mean that sterling’s fall is overdone. There is definitely more political risk in the UK because of the limited majority and it needs to be reflected in markets. However, one positive is that the election outcome may lead to an increase in government spending, which would be reflationary and positive for shares. However, a discount on equities in companies exposed to the UK economy is likely.”

 

David Jane, fund manager at Milton:

“There’s evidence that the effect of sterling’s devaluation and the consequent increase in inflation is beginning to impact consumer spending decisions. Wages have lagged prices – although the lag isn’t material, retailers in particular appear to be having a difficult time. New car sales are also falling, perhaps the impact of the diesel scares and the election has caused a deferral of purchasing decisions, but it’s concerning nonetheless.

“Rents are now falling nationwide, suggesting consumers have less income, or maybe more first timers are buying as mortgage affordability is improving. This could be seen in two ways, evidence of consumers having less money or, given that rents are such a high portion of many household’s outgoings, freeing up income for use elsewhere.

“On the positive side, the manufacturing PMI data is still strengthening and the overall PMI is pointing to expansion, suggesting the difficulties may be specific to these individual consumer sectors, while internationally faring businesses are doing well from the devaluation.

“Outside of equity we find little attraction in the UK government bond yielding less than 1%, when inflation is over 3%, which means there’s little in the corporate bond market offering a positive real yield either. In this area, we would rather consider the US where yields are materially higher and the era of QE is in the past.

“Currencies remain a difficult area, as they can add so much extra volatility for little extra return. So, we have much of our overseas-dominated portfolios hedged back into sterling, particularly the bonds. With overseas currency exposure broadly diversified and at roughly 25% of the portfolios, sterling strength is a risk but unlikely to dominate returns.

“Broadly we think the UK now appears even less compelling compared to opportunities elsewhere. We maintain a low overall exposure but recognise that there are some good value situations available.”

 

Naomi Heaton, CEO at London Central Portfolio:

“Given the unprecedented turn of events as the UK election results are announced, there will undoubtedly be an impact on the UK and London housing markets.

Whilst it is most likely that the Conservative party will form a coalition with the DUP to create a working majority, the UK looks set to face an extended period of uncertainty, historically unattractive to inward investment.

However, as it does not appear possible for Labour to form a rainbow coalition with the other remaining parties, the uncertainty caused by a possible second EU referendum may have receded. In addition, the weakened position of the Conservative party, in conjunction with a pro ‘soft-border’ DUP, would suggest that the UK will be on course for a softer Brexit.

This outcome may well be attractive both to institutions considering their position in the City of London and international investors looking at the UK, particularly as global events such as the Trump-Russia affair and continuing destabilisation in the Middle East is causing even greater economic and political flux outside the UK.

The diminished threat of Labour implementing aggressive un-costed tax and spend policies will also be welcome both to business and investor sentiment, taking the edge off uncertainty caused by these election results. Significant tax increases targeted at property investors that Labour might also have instituted are now less likely to occur.

Whilst sterling has rallied slightly in the early hours of today, it is now between 2% and 3% down against the dollar and euro from yesterday (as of 9.00am 09/06/17) from an already weak position. This is likely to continue in the current political situation which may encourage more active investors to take advantage of discounted prices in the property and stock market.

Nevertheless, it is anticipated that transactions will continue to fall in prime central London whilst investors assimilate the new situation, particularly at the luxury end and in the new build sector, already battered through the introduction of new residential taxes.

For the domestic housing market, outside prime central London, the recent evidence of a downturn by most data analysts, due to concerns over a weakening UK economic position and rising inflation, is unlikely to be reversed in light of the current events.”

 

Marie Owens Thomsen, global head of Economic Research at Indosuez Wealth Management:

“The outlook for the economy takes a hit from this outcome. GDP growth will arguably be slower as uncertainty weighs on investment and consumption, and a weak future government is likely to find it difficult to push through significant reforms. Risk-averse investors might wish to stay away until the horizon clears somewhat. That said, there are always opportunities in volatile markets and the UK is still an economy of 65 million people and it will not implode – rather, there might simply be better investment opportunities elsewhere.”

“This election was Ms Theresa May’s to lose, and she did. The blame must be put squarely on her as the campaign was centred on her person as the sole “saviour” of the UK post-Brexit. Clearly, the population was not convinced. Moreover, the population seemingly wants to put Brexit behind it, in spite of the fact that it still lies firmly in the future. Centring the campaign on this issue failed to inspire, and voters were much more moved by the issues of jobs and healthcare championed by Labour’s leader Mr Jeremy Corbyn whose party went on to capture 29 new seats.”

 

David A. Meier, economist, Julius Baer:

The pound suffers: “The Tories’ defeat increases political risks, causing the pound to suffer by 2% against the EUR and the USD. Once again, markets were caught wrong-footed. We stick to our bearish long-term pound outlook at EUR/GBP 0.92 as fundamentals have not changed – yet– and wait for the dust to settle, with delays in Brexit negotiations and further uncertainties, such as possible re-elections, ahead.”

 

Christoph Riniker, head of Equity Strategy Research, Julius Baer

“The election results out this morning do not exactly reflect the expectations encouraged by the polls. It is fair to say that the political uncertainty in the UK is rising again and thus might have implications for financial investments.

“The pound could weaken again, which in theory should have a positive impact on internationally-oriented UK stocks. While a clear majority in parliament would have had signalling effects, the upcoming hung parliament does less so. We stick to our neutral stance for the time being and reiterate our preference for the internationally oriented FTSE 100 over the domestic FTSE 250.”

 

Colin McLean, managing director, SVM Asset Management:

Ahead of the vote, there was little selling of UK risk: 10 year gilt yields are near their lowest since October. The FTSE Mid 250, which emphasises domestically oriented UK businesses, has been strong recently. But I expect selling today, with falls of 2 to 3% in sectors like property, media, retail and challenger banks. However FTSE 100 sectors with international earnings – pharma, oils, mining, exporters – should gain on the weaker Pound. The majority of FTSE 100 earnings are overseas.  But some domestically-oriented sectors such as house building and building products can benefit in the coming months as there is cross party agreement on the need to boost these,although with differences in implementation.

A barely workable Conservative majority will certainly weaken Britain’s hand in Brexit negotiations and may delay the start of talks this month. But recently investors seemed to think that a reduced Conservative majority might increase prospects for flexibility in negotiations and a soft Brexit. If anything can be taken from a confused election result, it is that the electorate does not want a hard Brexit. This may already be reflected in the calmness with which investors approached the election. Business and consumer confidence has been resilient. The pound has sold off  overnight and could see a further modest fall, giving up its rally this year. The weak result for the SNP in Scotland undermines the momentum for another independence vote.  Avoiding nationalisation risk and  higher corporate tax risk are also positives from a UK equity market perspective.

The path to a more generous transition agreement is now less clear. This adds uncertainty and volatility. Theresa May would have hoped for a cabinet reshuffle, selecting the cabinet that will help her most in the Brexit negotiations, after beginning with a compromise team.  Markets would have been reassured if one or two hard Brexiteers are dropped. Instead it is now more likely that one of the hard Brexiteers will replace her in party leadership. Her own position is untenable.

The global background may matter more to investors than the election result. Growth in the economies that were hit by the financial crisis is still sub-par, and the ratio of global debt to GDP is now at a record high.  Indeed, many major economies have higher debt levels today than they had at the start of the crisis. In the periphery of the Eurozone, non-performing loans remain high.”

 

Richard Woolich, UK head of Tax at global law firm DLA Piper:

“Assuming the Conservative Party forms the next Government with the support of the Unionists, then so far as tax policy is concerned, and subject to the demands of the Unionists, the Conservatives should be able to maintain their drive for low corporate taxes, and no increases in income tax for the higher paid. The planned reduction in corporation tax  from 19% to 17% in 2020 should go ahead, subject  to the state of public finances, and subject to any deal done with the EU as part of the Brexit negotiations.”

Link to this article: : http://www.goldmadesimplenews.com/gold/live-reactions-to-uk-hung-parliament-election-result-13207/

Posted by on Jun 9 2017. Filed under Analysis, Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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