Pound firms, oil drops as markets await British vote

NEW YORK - 8 June 2017: The pound climbed Wednesday on the eve of the British general election, while oil prices fell hard after a US inventory report suggested weak demand in the world's biggest economy.

Global equity markets were mixed with European bourses retreating, Tokyo flat and New York scoring modest gains.

Traders across the world have been cautious ahead of a news-jammed Thursday that also includes a European Central Bank policy meeting, and congressional testimony from fired FBI chief James Comey over a probe of President Donald Trump's campaign's dealings with Russia.

"There's a lot of stuff that people are watching," said William Hamlyn, an investment analyst at Manulife Asset Management, noting that UK investors will "mainly focus" on the snap election.

Despite worries over whether the ruling Conservatives will secure a fresh majority, the pound pushed higher. But that did not help the main FTSE 100 stock index -- which includes many firms that see crimped profits with strong pound -- as it closed down 0.6 percent.

Opinion polls predict a win for Conservative Prime Minister Theresa May, but main opposition Labour leader Jeremy Corbyn has gained ground in recent weeks.

"The election Thursday basically boils down to an event that stokes political certainty or uncertainty in Britain," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

"If the former, the pound would tend to fare its best. But if the latter, sterling could come under renewed fire."

Meanwhile, US stocks shook off two days of declines to score modest gains, thanks to an advance by banking stocks.

In his testimony released Wednesday afternoon, Comey said Trump urged him to drop a probe into former national security adviser Michael Flynn and his contacts with Russia, confirming news reports.

US stocks did not react to the testimony, which also expressed the fired FBI chief's profound discomfort with Trump's behavior.

"People are waiting to see the question and answer," said FTN Financial chief economist Chris Low.

"One of the big questions is whether Republican Senators are going to bother to keep Trump out of trouble."

Petroleum-linked shares were sharply lower after a bearish US inventory report prompted a more than five percent drop in US oil prices. The report showed an unexpected increase in crude oil stocks, as well as higher inventories of gasoline, a particularly troubling sign for demand as the US moves into the traditional summer driving season.