The pound stood firm and London’s blue chip share index nudged higher as markets remained in a “relaxed mood” after Labour’s dramatic, but expected, victory in the General Election.
With a significant Labour majority already having been priced into financial markets, there was a muted reaction to the election result as investors looked to the new political era as promising stability and calm, according to experts.
Sterling lifted 0.1% to 1.278 US dollars – the highest level since mid-June – and was up 0.01% at 1.180 euros, while the FTSE 100 Index was 0.2%, or 16.2 points, higher at 8257.5 in early trading on Friday.
Housebuilders were leading the way on the FTSE 100 as Labour’s landslide win was seen as a boost to the sector, amid hopes of planning red tape being cut to pave the way for more developments and housing supply.
Victoria Scholar, head of investment at interactive investor, said: “The relaxed mood across financial markets reflects the fact that Labour’s landslide win had long been predicted by the polls and therefore was already baked into market prices.
“In stark contrast to Liz Truss’s ill-fated mini-Budget in 2022 which sent bonds and the pound tumbling, today’s lack of market volatility and subdued price action suggests investors and traders see the latest election outcome as a democratic vote in favour of a new political era representing stability and calm.”
Experts said attentions in the market will now turn to the State Opening of Parliament and the King’s Speech on July 17 and the policies that may usher in, as well as the prospect of a possible interest rate cut in August.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “There may be a honeymoon period for the new administration, but then difficult decisions will have to be taken in office.
“The size of the victory and the upswell of support for smaller parties and independents will leave Labour MPs concerned about the safety of their seats at the next election.
“They know they have to deliver for the electorate but are likely to be hampered by a commitment to be fiscally responsible and restrain spending.
“The priority will be keeping the markets unruffled in the first days, weeks and months of the new administration and not overdoing spending pledges.”
On the FTSE 100, Charles Church builder Persimmon led stocks higher as the sector gained strongly on optimism for planning reforms under the new Labour Government, with the stock up by more than 3% in morning trading.
Fellow housebuilder Vistry followed with a 3% gain, while Barratt Developments and Taylor Wimpey also rose strongly, both up 2% in the UK’s top flight index.
But banks were among those seeing early session falls, with HSBC the biggest FTSE 100 loser with a 1.3% drop and Standard Chartered down nearly 1%.
Market experts said traders are also now likely to shift their focus to the second round of the French elections, which has caused a bigger ripple in European financial markets in recent weeks.
The country is holding its general election on Sunday, after its far-right National Rally party secured the most votes in the first round of the surprise legislative elections.