Stocks in London closed mostly higher on Thursday as investors awaited the outcome of the UK general election.
Pollsters currently have Labour waking up to a majority, marking the first time that the party has been in power since 2010.
The FTSE 100 index closed up 70.14 points, or 0.9%, at 8,241.26. The FTSE 250 ended up 80.92 points, or 0.4%, at 20,610.34, while the AIM All-Share closed fractionally lower, losing 0.70 points, or 0.1%, at 769.42.
The Cboe UK 100 ended up 0.8% at 820.18, the Cboe UK 250 closed up 0.5% at 17,932.88, and the Cboe Small Companies ended up 0.1% at 16,971.12.
According to Ipek Ozkardeskaya, an analyst at Swissquote Bank, the two most likely scenarios are ‘a good Labour majority with 150 seats’ or ‘a supermajority’. Yet technically speaking, the term ‘supermajority’ - used in the Conservative Party’s campaign, and originating from the US federal system - doesn’t really apply to UK politics.
Legislation in the House of Commons requires 50% of the parliamentary vote to pass, meaning that the difference between an 80-seat or 200-seat majority is ‘immaterial’, as Institute for Government Director Hannah White explained.
Regardless, ‘markets seem braced for a crushing Labour win, and a small majority or even a coalition would perhaps be the unexpected – and least-favoured – outcome from the narrow perspective of investment’, said AJ Bell’s Russ Mould.
‘Labour has promised not to increase income tax, VAT, NI or corporation tax. Although it has said nothing on income tax thresholds, for example, this still leaves it with very few levers to pull, barring capital gains tax reform on private equity and a windfall tax on oil and gas.’
‘Markets will look for future discussions on CGT more widely and also whether any other industries come under the microscope – one of Tony Blair’s first acts was a windfall tax on utilities back in 1997 so utilities and oils are likely to be stock market sectors that are sensitive to any potential leftward swing in party policy, as are other regulated industries where levels of customer disaffection and frustration are running high.’
In European equities on Thursday, the CAC 40 in Paris ended up 0.8%, while the DAX 40 in Frankfurt ended up 0.4%.
Major stocks in Europe finished in the green, even after data showed a contraction in eurozone construction activity in May.
The HCOB eurozone construction PMI total activity index edged down to 41.8 in June from 42.9 in May. Falling further from the 50-mark separating growth from contraction, it indicates that the slowdown in activity has accelerated.
In Germany, the construction PMI total activity index improved to 39.7 in June from 38.5 in May, marking the mildest slowdown in activity in 10 months. Expectations remained pessimistic but improved to a 28-month high.
In France meanwhile, construction activity fell at the sharpest rate in three months. The HCOB France construction PMI total activity index declined to 41.0 in June from 43.4 in May.
Locally, the UK’s construction activity saw growth in June, but at a slower rate than in the prior month.
The headline S&P Global UK construction purchasing managers’ index registered 52.2 points in June, down from 54.7 points in May. This was below market consensus, with FXStreet pencilling in a fall to just 53.6.
Remaining above the 50.0 no-change mark for the fourth consecutive month, the latest reading signalled a sustained improvement in overall construction activity in the UK, albeit with the pace of growth softening from the previous month.
S&P explained that the main driver in growth continued to come from commercial activity. The only category to record a drop in activity was housing, where output fell ‘solidly’, S&P added.
The pound was quoted at $1.2765 at the London equities close on Thursday, compared to $1.2768 at the close on Wednesday. The euro stood at $1.0812 at the European equities close, higher against $1.0806 at the same time the day before. Against the yen, the dollar was trading at JP¥161.16, lower compared to JP¥161.54.
On the FTSE 100, Smith & Nephew gained 6.9%.
Shares in the London-based medical technology company got a boost on Thursday, after activist investor Cevian Capital II GP took a stake in the firm. Cevian, which holds its headquarters in Stockholm, has acquired a 5.02% stake in Smith & Nephew.
On the FTSE 250, Spectris gained 1.8%.
The London-based supplier of high-tech instruments, test equipment and software for industrial applications announced on Thursday that it will buy SciAps for up to $260 million. The acquisition comprises an upfront cost payment of $200 million and a deferred payment of up to $60 million.
Based in Boston, Massachusetts, SciAps is a provider of handheld instruments leveraging X-ray fluorescence and laser induced breakdown spectroscopy techniques for materials analysis.
Spectris Chief Executive Officer Andrew Heath said: ‘SciAps is an excellent business and a great addition to Spectris Scientific, bringing complementary technology and strengthening our offering, including our innovative digital solutions. The acquisition will strengthen Spectris’ position in a number of key end markets benefiting from long-term, secular and sustainability growth trends, as well as accelerating sales of SciAps and Malvern Panalytical’s offerings through each other’s sales and distribution channels.’
On London’s AIM, Distribution Finance jumped 24%.
The Manchester, England-based specialist bank said it expects full year results to be significantly ahead of market expectations.
CEO Carl D’Ammassa commented: ‘2024 has started exceptionally well, with strong operational and commercial execution as well as portfolio management and control. Our products and services clearly resonate with our customers and seeing continued record new loan origination is a testament to the entire team’s focus on providing high quality service and the deep relationships we have with our dealer and manufacturer partners.’
Brent oil was quoted at $87.44 a barrel at the London equities close on Thursday from $86.33 late Wednesday.
Oil supply threats in the US due to Hurricane Beryl and a bullish US oil inventory report helped boost the oil market, ING analysts Warren Patterson and Ewa Manthey said.
‘Recent reports suggest that the hurricane is now disrupting US oil output, with companies like Shell PlC, BP PlC, and Exxon Mobil Corp evacuating some of their platforms in the Gulf of Mexico,’ Patterson and Manthey reported.
US crude oil stocks fell sharply, suggested robust demand in the world’s largest economy that is celebrating Independence Day on Thursday.
Official US crude oil inventories rose by 12.2 million barrels for the week ended June 28 to 448.5 million barrels, the US Energy Information Administration reported on Wednesday. This was the biggest weekly decline since July 2023 and it beat market expectations of a drawdown of just 411,000 barrels, ING analysts said.
Gold was quoted at $2,358.90 an ounce at the London equities close on Thursday, lower against $2,361.74 at the close on Wednesday.
Friday’s economic calendar has a handful of data, including a house price index reading from the UK at 0700 BST, and industrial production from France at 0745 BST, and from Germany at 0800 BST. Bank of England Executive Director James Benford is due to speak at 1000 BST.
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