EUROPE MARKETS: European Stocks Rise On Expectations Of Softer Brexit
Stoxx Europe 600 still on track for weekly decline
Major European stock benchmarks closed higher Friday as the outcome of the U.K.'s general election, which left the British government with a hung parliament, sparked expectations that the country will seek a softer version of its exit from the European Union.
The FTSE 100 in London fell 0.4% to 7,449.98 (http://www.marketwatch.com/story/ftse-100-futures-swing-higher-as-pound-sinks-to-7-week-low-2017-06-09). Elsewhere in Europe, Germany's DAX 30 climbed 0.8% to 12,815.72, and France's CAC 40 leapt 0.7% to 5,299.71.
The session got under way with the pound tumbling to a seven-week low against the dollar, below $1.27. That was triggered after Britain's Conservative Party--which advocated a hard U.K. exit from the European Union--fell short of winning at least 326 seats needed to control the House of Commons. In a hung parliament, no single party has a majority.
See:U.K. election--So what is a hung parliament? (http://www.marketwatch.com/story/uk-election-so-what-is-a-hung-parliament-2017-06-08)
"The negotiations may now take longer, but the eventual outcome could be a softer form of Brexit, which would be better for the region's economy," John Higgins, chief markets economist at Capital Economics, said in a note.
Read:The U.K. election result could mean a 'softer' Brexit (http://www.marketwatch.com/story/what-will-uk-election-result-mean-for-brexit-2017-06-08)
A weak pound can make shares of multinational companies listed on the FTSE 100 more attractive, as it can help boost their sales by easing selling prices. Among such companies, shares of luxury goods maker Burberry Group PLC (BRBY.LN) gained 1.5% and building materials supplier CRH PLC rose 2.6%.
But several domestically focused U.K. stocks were hit hard after the election result, limiting gains for the broad-based Stoxx Europe 600 . The index was up 0.3% at 390.39. For the week, the index logged a 0.6% decline.
"The British stock market managed to capture both the elements of uncertainty and a weaker pound all in one day," said Jasper Lawler, senior market analyst at London Capital Group.
Among U.K. stocks on the pan-European benchmark, property developer Berkeley Group Holdings PLC (BKG.LN) suffered a 3.6% loss, Metro Bank PLC (MTRO.LN) fell 2.7%, and retailer Next PLC (NXT.LN) moved 1.8% lower.
"Banks shares were amongst the worst performers, despite the positive implications for foreign earnings because it likely means a longer wait until the Bank of England raises rates," said Lawler.
May called a snap election in April in a bid to strengthen her position before entering negotiations over Brexit. Despite the poor showing, May said Friday she will form a new government with the support of Northern Ireland's Democratic Unionist Party, which holds 10 seats. The DUP said it would talk to May about an possible arrangement.
See:A hung parliament didn't stop Theresa May from clinging onto power (http://www.marketwatch.com/story/uk-election-so-what-is-a-hung-parliament-2017-06-08)
(END) Dow Jones Newswires
June 09, 2017 12:34 ET (16:34 GMT)