Historic turning point for Great Britain which is turning to the left, or rather towards the centre-left, confirming the expectations of the eve, which gave a clear victory of the Labour Party led by Sir Keir Starmer.
A match won with a overwhelming result 410 seats out of 650 total seats in the House of Commons, against the 131 seats won by the Conservatives by Rishi Sunak. This result updates the Tory record lows who are paying for more than a decade of shocks, scandals, not always convincing leadership, and characterized by a pandemic and a long economic crisiswhich also led to the collapse of the pound to historic lows during the Truss government, precisely in view of a prolonged recession.
Great Britain, then, chooses a more moderate patha smooth sailing like the one promised by the Stamerian wing, also in reaction to all the difficulties generated by the Brexit and the economic crisis that followed. A choice in the name of change, under the slogan “change” that also has a sense of redemption. But how did the markets take the victory?
The “calm” reaction of the markets
The departure of the London Stock Exchange It was marked by the consolidation of the advantage acquired so far, since the main stock market index of the City, the Footsiehas updated its all-time highs in springThe FTSE 100 index is currently up 0.37%, outperforming other European stock markets, which appear more hesitant.
The pound is also doing wellwhich continues to strengthen against the dollar, settling at 1.2779 USD (+0.13%), also in response to a dollar that has weakened for reasons related to the disappointing macroeconomic data released in recent days, while it remains stable against the euro at 1.1803 EUR, the highest in the last period.
The UK 10-year yield – 10 Year Gilt – rose to 4.2170% (+0.015 points), in the face of a monetary policy that remains restrictive in view of a stable return of inflation within the 2% target. At these yield levels, the Spread with the German Bund it stands at 164.1 points.
Analysts’ Expectations Met: What Happens Now?
There Labour victory it was almost was discounted by financial analysts, who were therefore expecting a “relatively muted” reaction from financial markets.
Second Richard FlaxChief Investment Officer of Moneyfarm“the prospect of a large majority for a ‘centrist’ government should be greeted with relief from investors, increasing the appeal of UK assets“, although it must be taken into account that “the Labour Party will be called upon to confront a complex scenario: the combination of high tax pressure, ailing public services and a lack of capital investment poses significant challenges”. “The incoming government – the analyst points out – hopes that falling inflation and interest rates will give a boost to growth, increasing voter confidence and giving the executive some breathing space to implement its policy programme”, although it is believed that “Starmer and Chancellor Reeves will try to increase the tax burdenlikely increasing capital gains tax and the inheritance tax: initiatives that certainly will not be well received by investors, but which would be destined to increase revenue and the consensus of the left wing of the Labour Party, inclined towards a greater redistribution of wealth”.
For Laura FollPortfolio Manager of the Global Equity Income team at Janus Henderson“the outcome of the British elections offers investors the opportunity to focus again on the positive characteristics of the companies listed in the UK”. The victory of the Labour Party – it is underlined – “brings with it a sense of political stabilitya focus on economic revival and the easing of trade barriers with the European Union (EU), all of which are supporting investor sentiment on UK stocks.” “A greater economic growth of the United Kingdom would be ‘clearly positive’ for domestically oriented stocks – suggests the analyst – as it would create the potential for higher sales and earnings growth. While Labour’s proposed supply-side reforms are likely to take some time to have an impact on the economy, it could be that the incoming government already inherits a better domestic environment, with the UK economy having already emerged from the shallow recession experienced in the second half of 2023. An area of interest initial for the incoming government seems to be housing constructionparticularly the desire to increase the number of homes built each year. Many publicly traded companies in the UK could have a positive impact if Labour were to achieve these goals.”
