London stocks, pound steady after vote call triggers volatility

London's stock market flattened Wednesday following the previous session's sharp fall that had been triggered by a rallying pound after Britain called a snap general election, a move lawmakers comfortably backed in a parliamentary vote.

The eurozone's main indices rebounded a little having also fallen heavily Tuesday, as investors look ahead to France's tight presidential election on Sunday.

"Following some turbulent trade yesterday the FTSE 100 and sterling are rather more subdued... as markets digest the potential impact of the unexpected snap election going forward," said David Cheetham, chief market analyst at XTB trading group.

British lawmakers overwhelmingly backed by 522 votes to 13 May's call to hold a snap election on June 8, before the country enters gruelling Brexit negotiations.

With the FTSE 100 featuring many multi-nationals earning in dollars, the stronger pound sent the index closing down 2.5 percent on Tuesday -- a reversal of recent months which saw sharp gains for the London stock market thanks to a slump for sterling.

"The British pound literally exploded after Theresa May took the market by surprise with her general election announcement," said Naeem Aslam, chief market analyst at Think Markets UK.

Fawad Razaqzada of Forex.com said investors hoped an early British election would give May a stronger mandate on delivering the British withdrawal from the EU, although "in reality things might turn out differently, as US investors are starting to find out with regards to Donald Trump.

"After all, we still don't know, for example, what type of a trade deal will the UK get from the EU. Thus, it can be argued that Tuesday's upsurge in the pound may have been a bit of an overreaction."

In company news Wednesday, shares in luxury fashion brand Burberry slumped 6.7 percent to 1,589 pence as analysts predict a possible end to the group's recent run higher.

A trading update Wednesday showed the group's sales have grown thanks in large part to tourists visiting Britain taking advantage of sterling's drop.

"News of a snap UK election has seen a strong rally in the pound," broker Liberum said in a note to clients. "Should this continue towards polling day, Burberry's own forex-driven rally could disintegrate."

Asian markets mostly turned lower Wednesday following Tuesday's negative leads from Wall Street and Europe, with analysts saying Britain's shock decision to call a snap election added to global uncertainties.

The pound largely held onto its gains after May announced a snap poll for June 8 as she looks to cement a mandate heading into key Brexit talks with her EU counterparts.
The move comes as France prepares for the first round of its presidential elections at the weekend, while Germany is set for a vote this year. Both could have huge implications for the future of the eurozone.

Added to this is the face-off between the US and North Korea and the cooling of relations between Washington and Moscow over the Syria crisis.

Haven assets were holding up as investors fret over the global outlook. Gold is up more than two percent since Donald Trump ordered missile strikes on a Syrian airbase earlier this month, sparking fears of a possible conflict with Russia which is backing the Damascus regime.

There is a "growing wait-and-see mood due to such uncertainties as the French election and British snap poll", Okasan Online Securities chief strategist Yoshihiro Ito said in a commentary.

Elsewhere on Wednesday, oil prices rose as OPEC's chief voiced confidence that production cuts agreed with crude producers outside the cartel will help to lift prices.

"We are optimistic that the policy measures we have taken already place us on the path of recovery," OPEC Secretary General Mohammad Sanusi Barkindo said at an energy forum in Abu Dhabi.


London - FTSE 100: DOWN 0.2 percent at 7,131.37 points
Frankfurt - DAX 30: UP 0.2 percent at 12,030.57
Paris - CAC 40: UP 0.3 percent at 5,004.24
EURO STOXX 50: UP 0.4 percent at 3,422.71
Tokyo - Nikkei 225: UP 0.1 percent at 18,432.20 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 23,825.88 (close)
Shanghai - Composite: DOWN 0.8 percent at 3,170.69 (close)
New York - Dow: UNCHANGED at 20,516.56
Pound/dollar: DOWN at $1.2800 from $1.2840 at 2100 GMT Tuesday
Euro/pound: DOWN at 83.53 pence from 83.58 pence
Euro/dollar: DOWN at $1.0720 from $1.0732
Dollar/yen: UP at 109.04 from $108.45 yen
Oil - Brent North Sea: UP 20 cents at $55.09 per barrel
Oil - West Texas Intermediate: UP 12 cents at $52.97