Good morning! Here’s what you need to know on Friday.
Britain is headed for a hung parliament after a huge Labour Party surge denied the Conservatives a majority in the House of Commons at 2017’s general election. With results in more than 600 of the UK’s 650 constituencies announced, it looks as though the Tories will gain between 315-321 seats, leaving them roughly 10 seats short.
Reports suggest that Prime Minister Theresa May could step down from her post this morning after a humiliating night for her. “That is a matter for her. It’s bad. Even if she stays, she will have an extremely difficult time patching together a functioning government,” Tory MP Anna Soubry told the BBC. “If she goes, it sets up the stage for yet another general election later this year.”
The pound dropped sharply as initial projections that the Conservatives wouldn’t win a majority were released. At 10.00 p.m. on Thursday evening when a joint exit poll from the BBC, ITV, and Sky dropped, sterling sold off close to 2% against the dollar, dropping to $US1.2722 at its lowest point. Since then it has been broadly unmoved, and by 5.45 a.m. BST is trading at $US1.2756.
UK stock futures are pointing to a small but unspectacular drop when markets formally open at 8.00 a.m. BST (3.00 a.m. ET). Having dropped off a cliff after the exit poll was released, FTSE 100 futures have retraced most of those losses, and are down just 0.1% at the time of writing.
Former FBI Director James Comey’s blockbuster hearing on Thursday provided several bruising moments for President Donald Trump. Comey, who Trump fired in early May, said he believed he was fired “because of the Russia investigation,” amplifying calls that Trump was obstructing justice. He said he took Trump’s comments that he “hoped” for the ousted FBI director to “let go” of the investigation into former national security adviser Michael Flynn “as a direction.”
The European Central Bank released its latest monetary policy decisions on Thursday afternoon, following the June meeting of its governing council. Monetary policy stayed on hold, with the ECB maintaining a deposit rate of -0.4% for banks, a base interest rate of 0.0%, and a quantitative easing (QE) program of up to €60 billion per month.
While policy did not change, the ECB made a crucial change to the statement accompanying the decision, changing a sentence in the first paragraph to remove the words “or lower” from a section discussing the future direction of interest rates. Removing the words “or lower” from the statement effectively means that the ECB is now ruling out taking interest rates further into negative territory in the foreseeable future, removing its easing bias to monetary policy.
However, in a press conference after the decision, President Mario Draghi seemed to contradict that guidance. “On the current expectation, I don’t expect lower interest rates, but you ask me: ‘In case things were to worsen are you ready to lower interest rates?’ The answer is ‘yes’.”
In the United States, the House passed a bill to roll back some of the strongest Wall Street regulations from the financial crisis. The Financial CHOICE Act, a massive bill from Republican Rep. Jeb Hensarling, the chairman of the House Financial Services Committee, would do away with many of the protections in the landmark Dodd-Frank Act. The bill passed 233-186 with 11 abstaining. The vote was along party lines except for one Republican, Rep. Walter Jones of North Carolina, who voted against the bill.
The chances of Saudi Arabia’s state oil company listing in London increased overnight after reports that the company will not seek to join the FTSE 100 if it chooses the UK for its upcoming IPO. According to the Financial Times, which broke the news, Saudi Aramco’s decision not to seek FTSE 100 entry averts a “confrontation with City institutions” and strengthens “London’s status as frontrunner for a slice of the Saudi state oil group’s initial public offering.”
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