LONDON May 31 Stocks rose on Wednesday as
investors looked to close the month on a high, while sterling
fell after an opinion poll suggested the ruling Conservatives
could lose seats in next week's UK general election, potentially
leading to a hung parliament.
World stocks are poised to end May up nearly 2 percent,
marking the seventh straight monthly increase and the longest
monthly winning streak in over a decade.
MSCI's global equity index rose 0.1 percent
on Wednesday, sterling's earlier slide helped lift Britain's
FTSE 100 to a fresh record high, and Germany's DAX
rose 0.5 percent.
U.S. futures pointed to a rise of 0.1 percent on Wall
European stocks gained 0.2 percent after a
sharp fall in euro zone inflation led investors to believe the
European Central Bank won't be quite as hawkish at its policy
meeting next week than had been expected.
"The data suggest no need for the ECB to raise its
refinancing rate before 2019. In the meantime, the Governing
Council will feel comfortable enough to turn more neutral in its
risk assessment at its meeting next week," said Florian Hense,
economist at Berenberg Bank.
The first estimate of euro zone inflation this month showed
at fall to 1.4 percent from 1.9 percent April, falling short of
analysts' forecast of 1.5 percent. Euro zone unemployment fell
to an eight-year low of 9.3 percent, also below consensus.
Earlier in Asia, shares drew some support from data that
showed activity in China's manufacturing sector grew at the same
pace in May as in April, although a sturdy performance from the
Japanese yen helped push the Nikkei into the red
The biggest mover in currencies was sterling, which shed as
much as 0.5 percent after a YouGov poll showed the ruling
Conservative Party might lose 20 of the 330 seats it holds while
the opposition Labour Party could gain nearly 30 seats.
Sterling fell to a six-week low of $1.2770 before
recovering some ground to $1.2830. It also slipped to 0.8748
pound per euro, near Friday's eight-week low of
On a trade-weighted basis, the pound slid to a new
eight-week low of 77.2.
New constituency-by-constituency modelling by YouGov showed
the ruling Conservative Party might lose 20 seats at the June 8
election while Labour could gain nearly 30 seats, potentially
leading to a hung parliament, The Times said.
The news came after a string of opinion polls showed a
narrowing lead for prime minister Theresa May's Conservatives,
shaking investors' confidence that she would easily win a
majority and strengthen her hand in the Brexit negotiations.
"We're getting very negative on sterling again," said George
Saravelos, FX strategist at Deutsche Bank.
"If May is unable to deliver a substantially increased
majority, her ﬂexibility to negotiate will not have improved. A
strong Conservative majority is also only a necessary, not
sufficient condition for a smooth Brexit," he said.
The euro shrugged off the soft inflation data and rose 0.3
percent to $1.1217, while 10-year German bond yields
retreated from an earlier rise to trade steady on the day at
The dollar was down 0.1 percent against the yen at 110.75
yen, and the 10-year U.S. Treasury yield was also flat on
the day at 2.22 percent. Two weeks ago it was at
In commodities, oil prices remained soft, as concerns
lingered about whether the extension of output cuts by OPEC and
other producing countries will be enough to support prices.
U.S. crude futures fell 2.2 percent to $48.57 a
barrel. Global benchmark Brent was down 2.5 percent at
$50.53 per barrel.
Gold edged up 0.1 percent to $1,264 an ounce.
(Reporting by Jamie McGeever; editing by xxxxxx)