LONDON MARKETS: FTSE 100 Climbs As Pound Slides On Election Jitters

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Tesco falls after data show loss of market share

Continue Reading Below

U.K. stocks advanced on Wednesday, boosted by a slump in the pound after a new voting estimate showed Theresa May's Conservative Party may lose its majority in the general election next week.

The FTSE 100 index added 0.2% to 7,540.89, partly recovering from its 0.3% loss on Tuesday. The index was closed Monday for a bank holiday.

For the month of May, the U.K. benchmark was on track for a 4.7% gain, its biggest monthly advance since December last year.

A fall for sterling was seen as driving the market action on Wednesday, with the pound falling to $1.2818 from $1.2860 late Tuesday in New York. The loss came after a YouGov estimate, reported by The Times newspaper, indicated that the Conservatives might lose 20 seats in the June 8 election. That means May's party would lose its current majority in parliament (http://www.marketwatch.com/story/theresa-may-could-lose-majority-in-uk-election-fresh-research-finds-2017-05-31), which is has had since the election in 2015.

Labour, on the other hand, is expected to gain 28 seats. A few weeks ago, the Tories stood to increase their majority substantially and bag a landslide victory. Investors had been pushing the pound above $1.30 on hopes a bigger Conservative majority would strengthen May's hand in the upcoming Brexit negotiations with Brussels.

Continue Reading Below

The YouGov research "distracts from the many [other polls] showing that a Conservative majority remains the most likely outcome, as is our base case. With no further indications of a hung parliament, the recent fall in sterling may be seen as a buying opportunity for investors," said Geoffrey Yu, head of the U.K. investment office at UBS Wealth Management, in a note.

In any case, the pound slide on Wednesday still gave a boost to the FTSE's big multinationals that make the bulk of their earnings overseas. Unilever PLC (ULVR.LN) (ULVR.LN) climbed 1.1%, British American Tobacco PLC (BATS.LN) (BATS.LN) gained 1% and Diageo PLC (DEO) (DEO) climbed 1.2%.

British Airways-parent International Consolidated Airlines Group SA (IAG.LN) (IAG.LN) rose 0.7%, rebounding in part from a 1.4% loss on Tuesday that came after a far-reaching computer failure at BA left thousands of passengers stranded over the weekend.

Read:The bill for British Airways's IT carnage? $111 million, Citi estimates (http://www.marketwatch.com/story/the-bill-for-british-airwayss-it-carnage-111-million-citi-estimates-2017-05-29)

Miners curbed the gains for the FTSE 100 after China's official manufacturing purchasing managers' index was unchanged in May at 51.2 (http://www.marketwatch.com/story/chinese-factory-activity-holds-steady-in-may-2017-05-31). China is a major user of natural resources, so any growth indications from the country tend to drive prices of metals.

Shares of Rio Tinto PLC (RIO) (RIO) (RIO) dropped 2.1%, Anglo American PLC (AAL.LN) fell 1.8% and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) lost 2%.

Also moving lower, shares of Tesco PLC (TSCO.LN) (TSCO.LN) gave up 0.9% after the latest Kantar data on U.K. supermarkets showed the grocer's market share fell to 27.8% in the 12 weeks to May 21, from 28.3% in the previous period.

J Sainsbury PLC's (SBRY.LN) (SBRY.LN) market share fell to 15.9%, but shares were up 0.8%.

(END) Dow Jones Newswires

May 31, 2017 06:33 ET (10:33 GMT)