British pound dips below $1.30
U.K. blue-chip shares advanced on Monday, getting a boost from a weaker pound after an election poll showed support for Theresa May's Conservative Party weakening ahead of the June 8 election.
Continue Reading Below
The FTSE 100 index picked up 0.3% to end at 7,496.34, rising for a second straight session.
"The general election is starting to look like it could spark some serious volatility as we head into June. For the first time a Tory landslide is not a given and there is reason to think that this alone could introduce a new bout of risk-off sentiment," said Neil Wilson, senior market analyst at ETX Capital, in a note.
Labour cut its gap with the Tories to 9 percentage points, to 35% vs. 44%, in a YouGov poll for The Sunday Times, the first time a mainstream poll showed the Conservative lead reduced to single digits. The poll weighed on the pound , which dropped to an intraday low of $1.2966, and provided a boost to the FTSE 100 index.
However, sterling pared its loss against the dollar later in the day after what was perceived as a U-turn from May on the Tories' stance on lifetime care costs. It traded around $1.30 at the time of the European markets close.
The U.K. currency also slumped against the euro to fetch EUR1.1575, compared with EUR1.1633 late Friday in New York. The euro strength came after German Chancellor Angela Merkel blamed the European Central Bank for making the euro too "weak." (http://www.marketwatch.com/story/pound-declines-after-shift-in-uk-election-polls-euro-climbs-2017-05-22)
(http://www.marketwatch.com/story/pound-declines-after-shift-in-uk-election-polls-euro-climbs-2017-05-22)A weaker sterling can help bolster foreign-denominated earnings made by multinational companies on the FTSE 100. The London benchmark pulled back last week as the pound pushed above $1.30 for the first time since September and as equities sold off on concerns that controversies surrounding the White House would derail U.S. President Donald Trump's agenda of tax cuts, deregulation and infrastructure spending.
Read:Here's how impeachment works--and why Trump is safe for now (http://www.marketwatch.com/story/heres-how-impeachment-works---and-why-trump-is-safe-for-now-2017-05-17)
Movers: Shares of Vodafone Group PLC (VOD.LN) (VOD.LN) gained 1.8% after Barron's in a report over the weekend highlighted the positive outlook for the telecoms company.
Rio Tinto PLC (RIO) (RIO) (RIO) put on 1.4%. The mining giant said it would reduce its debt, launched a bond purchase plan for up to $2.5 billion.
Shares of some of the U.K.-listed oil producers were also rising as oil prices gained about 1%. BP PLC (BP.LN) (BP.LN) added 0.4%, while Tullow Oil PLC (TLW.LN) gained 1.6%. Shares of Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN), however, fell 0.6%.
The gain in oil prices came ahead of Thursday's Organization of the Petroleum Exporting Countries meeting in Vienna. Analysts widely expect the group to agree to extend oil-production cuts of 1.8 million barrels for another six months at least.
Read:4 potential outcomes for OPEC's crucial meeting (http://www.marketwatch.com/story/4-potential-outcomes-for-opecs-crucial-meeting-2017-05-19)
(END) Dow Jones Newswires
May 22, 2017 12:27 ET (16:27 GMT)