Pound rises as Theresa May calls UK election, Europe stocks drop
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London: The pound jumped after British Prime Minister Theresa May announced an early general election. European stocks declined as traders caught up with a swathe of geopolitical events following the long weekend.
Sterling swung from gain to loss and back again versus the dollar as May set the vote for June 8, before rallying to the highest since 2 February. UK stocks fell by the most since November as gilts retreated. The Stoxx Europe 600 Index dropped to the lowest level in almost two weeks as mining shares plunged. Iron ore reeled after Citigroup Inc.’s bearish outlook for the raw material.
May said she was calling the election “with reluctance” but that the UK needs stability during Brexit negotiations. The unexpected gamble is likely aimed at strengthening her hand going into talks on leaving the European Union; polls show her Conservative Party is more than 20 points ahead of the main opposition.
“The markets are very uncertain and worried about various outcomes,” Dominic Konstam, Deutsche Bank AG’s global head of rates research, said. “This just adds another one. We’ve got the tax reform in the US, you’ve got the French and German elections. Now you’ve got this on top.”
A bounce in US stocks on Monday failed to cheer investors in the European session, as the standoff over North Korea’s nuclear weapons program rumbles on and the French presidential election looms. Two candidates who want to take the country out of the region’s common currency remain in contention in the most unpredictable race in recent history. Bloomberg