In pre-opening, European markets were trading in different directions. Today’s session should naturally be marked by the reaction of the financial markets to the results of the British elections. The latest projections indicate that the conservative British party, led by Theresa May, lost the majority in Parliament. Thus, the Conservatives will have reached 314 seats, the Labor Party 261, the National Party of Scotland 35 and the Liberal Democrats will have won 12 seats. With these results, none of the parties with representation in the House of Commons, obtained an absolute majority that allows it to approve a program of government, a situation described with the expression “hung parliament”. With this result, investors’ uncertainty about the future of the country increased, especially in relation to Brexit, which caused an immediate depreciation of the Pound against the Dollar in the exchange market. FTSE futures pointed to a positive market opening. In fact, there is a negative correlation between the currency of the country and the stock exchange index, since about 80% of the revenues of the companies that make up the FTSE are generated outside the country, so they benefit when the currency depreciates. A victory for Theresa May would make the future English politician more crystalline but would reinforce the likelihood of a more intransigent UK position, dubbed Hard Brexit.
The US stock market ended up high, with investors reacting fundamentally to the testimony of former FBI director James Comey. The Dow Jones industrial average hit an intraday high following James Comey’s comments, though he backed down. The S & P500 closed at a slight high, favored by banks (the SPDR S & P Bank ETF rose more than 2.50%) and conditioned by utilities. The testimony of the former director of the FBI was the event of the most awaited week and was closely monitored by investors to check on the possible impact of James Comey’s words on the implementation of the pro-growth agenda announced by Donad Trump . In terms of economic indicators, the number of weekly applications for unemployment benefits decreased in the first week of June, thus being at least a few decades old. This indicator fell by 10 000 to 245 000 between 28 May and 3 June. Analysts had forecast a further decline to 240,000 applications, but for the 118th consecutive week that figures were below 300,000, signaling a healthy labor market. This is the longest series since 1970, when the labor market had a smaller size.
Asian stocks mostly ended on positive territory. The session was volatile, with investors reacting to the news coming out with the early election results in the UK and with the resulting response from the currency market. Inflation for May was published in China: the consumer price index rose 1.50% year-on-year, in line with Reuters projections, but fell 0.10% on a monthly basis.