It started off a lovely breezy spring morning on Cheapside. Punters took their time to shake off the Easter Blues. Wall Street cracked on yesterday – up 0.85%; Asia stuttered over geopolitical problems, though Japan’s Nikkei was closed – down in Shanghai (-0.8%) and Hong Kong (-1.4%).
The FTSE 100 opened at 8.00am down 25 points, based on a rally in Sterling to $1.2575, with mining, oil and bank stocks on the slide. By 9.00am the FTSE was down by 70 points with these main sectors down between 2-4%. Then came an announcement that Theresa May would make a statement from Downing Street at 11.15am. There was plenty of speculation as to what was the message. Clearly calling a General election was at the top of the agenda. And so it transpired at about 11.07am. It was a very strong, resolute and bold statement. PM May made it very clear that the decision was reluctant. She had no alternative but to call one courtesy of subversive activity from the SNP, Lib-Dems, Labour and the House of Lords over BREXIT, making it impossible for the Conservative administration to govern.
Though I am a commentator of financial issues, I must say I think a 7 week election campaign is far too long – too many possible banana skins to slip up on. There are millions of disenchanted REMAIN voters out there who could vote tactically against the government over BREXIT. If it was a question of leadership and personality it would be a no-brainer – Mrs May is a ‘slam-dunk!’ However the country has never been so divided and surprises may be there a plenty. There is little comparison to the 1987 election when Margaret Thatcher sent Labour and Neil Kinnock packing. At that time the Conservatives were returned against a rejuvenated Labour party which had suffered under Michael Foot in 1983. This year Labour is in total disarray with Westminster playing all the subversive cards at their disposal. Back in 1987 the overall Conservative government fell to 102 from 144 in 1983. There were 3 million unemployed against 1.5 million today.
Prior to the announcement Sterling started to slide down to $1.2490, but the FTSE was still sliding – down 90 points due mainly to uncertainty. However post the statement Sterling rallied like a grilse back to $1.2660. However the FTSE surrendered another 30 points – down 125 at 7202 at 1.06pm, thanks to increasing support for Sterling, which damages the value of so many constituent stocks. Also frankly with a P/E ratio of 16.5 times earnings, the FTSE 100 was beginning to look a little rich for many peoples’ blood. So the reaction by investors was predictable.
Frankly folks it is a sea of red! – The main losers are BP -3.5% and Shell -3%. Miners are down between 2-4%. Others to surrender value include Unilever -1%, Diageo -1.5% and Reed Elsevier -1%. Banks have had a heavy heart – Barclays -3% and HSBC -1.5%. The DOW futures are down 35 points as I write with decent figures posted by Johnson & Johnson to Bank of America Mellon.