Asian Stocks Hold Up Despite UK Election Shock, GBP Sinks


Talking Points:

  • Asian stocks were mostly slightly higher on Friday
  • The UK’s surprise election result hit the Pound, but damage so far has been limited to that
  • Huge uncertainty remains however, as the UK Conservative party considers coalition

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Asia/Pacific stock markets were perhaps surprisingly calm Friday as the UK general election delivered no single party an overall majority.

This shock result took a heavy toll on the British Pound, but equity moved very little. The Nikkei 225 closed up 0.5%, with smaller gains seen for Australia’s ASX200, South Korea’s Kospi and the Shanghai Composite. Hong Kong stocks were in the red, off 0.2% into the close.

The British Pound slipped more than 2% against a US Dollar which was otherwise becalmed. The collapse of the ruling Conservative party’s majority in the UK parliament nevertheless leaves it with the first try and forming a coalition government but it remains unclear whom that might be with, and how it will work. A long vacuum, or a weak coalition, will be doubly harmful for the UK as Brexit negotiations are supposed to start in earnest in ten days’ time. However some European commentators have suggested that there could have to be a delay.

Local Asian data were not obviously influential on a day when so much focus was on London. In any case the main ones, Chinese inflation figures, came in almost exactly as expected.

Crude oil prices were steady. Gold prices were surprisingly lower, but only by about 0.3%.

The rest of the day will probably be dominated by UK-election news, but there are some economic data points of note coming up. Investors will get a look at manufacturing and trade numbers out of the UK, along with Canadian employment levels and, later, the US oil-rig count from Baker Hughes.

— Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX

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