-- As the UK prepares to head to the polls on Thursday, the country’s financial markets appear to be shedding their recent reputation for volatility.‘Upflation’ Is the Latest Retail Trend Driving Up Prices for US ConsumersBritish stocks are near a record high, bond fluctuations have evaporated, and hedging against pound weakness is at a seven-year low.
While the euro recouped some of those losses in the wake of the first round of France’s poll, analysts at Barclays Plc see the pound rally continuing, with potential for it to reach 80 pence against the common currency — a level not seen since the Brexit referendum. His view is reflected in one-month volatility for the FTSE 100, which hovers near its lowest levels of the year. In sharp contrast, swings in France’s CAC 40 shot up to its highest in more than a year in the run-up to the vote.
And on-and-off lockdowns to slow the spread of Covid-19, alongside the nation’s faster rollout of vaccines, created further market turbulence during the pandemic. UK markets are also benefiting from the BOE’s slower pivot toward easing than the European Central Bank. Traders now see the odds of a first cut by the BOE in August as a coin-toss, even as the European Central Bank has already lowered its benchmark rate and is expected to do so again by October.
Some of the party’s manifesto pledges could also prove troublesome for certain sectors. For example, shares in North Sea oil companies fell after Labour announced plans for a windfall tax on the sector and ruled out issuing new oil licenses, with Serica Energy Plc and Enquest Plc most impacted. A bid to takeover Royal Mail-owner International Distribution Services Plc could also implode.
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