Key events
“What a difference five years makes, Labour have turned themselves around” and is on course for a decisive victory, Kathleen Brooks, research director at the currency broker XTB, said:
Since the result is broadly as expected, the pound has had a muted reaction to [the] news. Due to this, the focus will now shift to what the future holds. Sir Keir Starmer still needs to lay out in more detail his plans for spending and taxation, and, most importantly, how he will grow the economy.
The financial markets trust that the UK’s fiscal position is secure with Labour, hence why bond yields and the pound have remained stable during this election campaign. The focus now will quickly shift to Starmer’s first 100 days in office, and how he lays out his economic plans to boost growth at the same time as improving public services.
Investors will be watching to ensure that Keir Starmer maintains his ‘stability’ message and fiscal prudence, otherwise he could find that the bond vigilantes are never far away. Ultimately, it’s the bond market that will determine Labour’s fiscal policies.
Sterling best-performing currency against dollar this year; investors say ‘boring is good’
Sterling has firmed slightly this morning. It has risen since Rishi Sunak called the election in late May, and is the strongest-performing major currency against the dollar this year, with a gain of 1.2%.
Laura Foll, portfolio manager at Janus Henderson Investors, said:
It’s a breath of fresh air to be running [UK] equities in a market where the election is seen as a non-event.
I’m hoping we’re going back to an era where boring is good and politics treads lighter in people’s lives. It will be a more gradual lifting [of confidence].
Introduction: Pound holds steady as business calls for ‘fresh start’ under Labour
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
We’ve woken up to a landslide Labour victory in the UK.
Keir Starmer has pledged that it is “now time for us to deliver” as his party’s election victory brings an end to 14 years of Conservative rule. The Labour leader is expected to become prime minister later today.
Rishi Sunak’s party is on track to record its worst ever performance in a general election.
As the results are broadly as expected and already priced into financial markets, the pound held steady. It has firmed slightly against the dollar, by 0.1% at $1.2770, and was up a smidgen against the euro at €1.18.
Stock market futures are pointing to a higher open on the FTSE 100 index in an hour.
The London Chamber of Commerce said the business community looks forward to a “fresh start” under Labour.
Chief executive Karim Fatehi said:
We look forward to working with government over the coming years to build a London where businesses of all sizes thrive.
Now is the time for the new government to quickly make the changes businesses need to succeed. As laid out in our manifesto this includes the introduction of policies that protect and support the capital’s businesses, enhance London’s international competitiveness, and simplify and enable infrastructure and planning. These policies will lay the foundations for future growth, address long term skills shortages, and foster greater innovation in our capital.
The CBI business group said “business stands ready to bring its innovation, ideas, and investment to make that shared mission a reality”.
Rain Newton-Smith, CBI’s chief executive, said:
The new prime minister has been given a clear mandate to take the tough decisions on areas like planning reform and boosting grid capacity needed to get the economy firing on all cylinders. What firms need now is a government that’s ready to hit the ground running and is laser-focused on delivery.
Households and businesses across the UK have shown incredible resilience through Brexit, Covid and war in Europe. With the economy picking up steam, now is the moment to get behind growth. Setting out a positive vision for the UK economy and leaning into our international leadership should be top priorities for the first 100 days.
The TUC said Labour has a “historic opportunity” to “repair and rebuild Britain”.
The union’s general secretary Paul Nowak said:
The trade union movement stands ready to work with this new government to deliver the change working families desperately need.
This means tackling the scourge of insecure work and boosting living standards. It means fixing our crumbling public services. And it means reversing over a decade of Tory stagnation with a proper plan for growth and industrial revival.
And this is the country following 14 years of Conservative rule:
The Agenda
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7am BST: Halifax house price index for June
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7am BST: German industrial production for May
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7.45am BST: France trade and industrial production for May
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10m BST: Eurozone retail sales for May
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1.30pm BST: US non-farm payrolls for June (forecast: +190,000), unemployment rate (forecast: unchanged at 4%)