Stocks Surge on Johnson Election Triumph, U.S. Trade Deal Reports
London stocks and the British pound jumped Friday after an election triumph for Conservative Prime Minister Boris Johnson that analysts said will bring clarity to Brexit proceedings and unlock stronger economic growth.
Other European stock markets -- although lagging buoyant London, which rose over two percent at one point -- also powered ahead, supported by reports that a U.S.-China partial trade deal is imminent.
Wall Street opened with a slightly softer tone.
"Investors might have two early Christmas presents this week: a phase one trade deal between the U.S. and China, and Brexit getting done," said Jasper Lawler, head of research at trading firm London Capital Group.
Johnson, whose governing Conservative Party swept to a decisive win, will now push ahead with Britain's scheduled exit from the European Union on January 31 as he seeks to dispel three years of uncertainty and political deadlock, with a post-Brexit, probably expansionary, budget planned in March.
"The UK general election has provided a clearer path towards a resolution to Brexit and looser fiscal policy, which should boost economic activity and push up sterling, UK equities, and Gilt yields," said Hubert de Barochez, an economist with Capital Economics.
But he also warned that "as long as there remains the possibility of something like a 'no deal', those gains ought to be limited".
European leaders welcomed also what appeared to be an end to Brexit paralysis, but also warned Britain against becoming "unfair competitor".
- 'Sigh of relief' -
The sheer scale of Thursday's victory -- the biggest Conservative majority since Margaret Thatcher's heyday in the 1980s -- sent the pound soaring to an 18-month dollar peak and to highs against the euro not seen since the June 2016 Brexit referendum.
Investors expressed relief that Johnson roundly defeated main opposition leader Jeremy Corbyn's Labor Party -- which had vowed to renationalize formerly state-owned companies.
"The threat to businesses from the Labor policies has been removed and there has been a collective sigh of relief," said Maurice Pomery, founder of trading group Strategic Alpha.
The pound held at elevated levels on Friday but pulled back somewhat from the multi-month peaks forged overnight.
"Further delays to Brexit look unlikely now, meaning households and businesses can plan accordingly. This is exactly why the markets have reacted in the way they have," Forex.com analyst Fawad Razaqzada told AFP by email.
- Trade deal, finally? -
Global investor sentiment was given another shot in the arm by reports that Beijing and Washington have reached a long-awaited trade deal.
US President Donald Trump is nearing a long-awaited pact between the world's economic superpowers that will see the cancellation of fresh US tariffs due at the weekend and the rolling back of previous measures, they said.
After months of high-level talks, negotiators presented the president with a deal that will see China ramp up its purchases of agricultural goods, Bloomberg News reported.
Trade tensions between the world's biggest economies have been a huge drag on global growth, with most countries being sucked into the stand-off, sending some into or close to recession.
"A trade deal, if agreed, could alleviate some of the growth concerns," said Razaqzada, adding that "this is a big deal given how important China is to the global economy".
- Key figures around 1430 GMT -
London - FTSE 100: UP 1.8 percent at 7,400.86 points
Frankfurt - DAX 30: UP 0.5 percent at 13,282.65
Paris - CAC 40: UP 0.6 percent at 5,917.94
EURO STOXX 50: UP 0.6 percent at 3,729.99
New York - Dow: DOWN 0.1 percent at 28,104.37
Pound/dollar: UP at $1.3327 from $1.3161 at 2200 GMT
Euro/pound: DOWN at 83.79 pence from 84.57 pence
Euro/dollar: UP at $1.1163 from $1.1130
Dollar/yen: UP at 109.36 yen from 109.31 yen
Tokyo - Nikkei 225: UP 2.6 percent at 24,023.10 (close)
Hong Kong - Hang Seng: 2.6 percent at 27,687.76 (close)
Shanghai - Composite: UP 1.8 percent at 2,967.68 (close)
Brent North Sea crude: UP 1.6 percent at $65.20 per barrel
West Texas Intermediate: UP 1.3 percent at $59.95