LONDON — British stocks are slipping a little on Monday morning as investors continue to digest the change (or lack thereof) to the UK’s political landscape after Friday’s shock general election result.
The UK’s benchmark share index, the FTSE 100, bounced on Friday after the election, driven higher by a big drop in the value of sterling following the results.
Though a weaker pound might seem like bad news for UK stocks, about 70% of the revenue of the companies that make up the FTSE 100 is derived from abroad, meaning they make more money when sterling is weak.
On Monday, that pattern has reversed, with sterling climbing a little from the worst of its post-vote losses. That, in turn, has subdued the FTSE.
By 8.20 a.m. BST (3.20 a.m. ET), the index is down more than 0.4%, to trade at 7,495 points, as the chart below illustrates:
Losses are also being pushed on by a general fall in sentiment globally after a major sell off in the USA late on Friday, as Mike van Dulken of Accendo Markets notes in his morning email.
Van Dulken argues that the morning’s losses come “after a strong Friday night tech sell-off which has rolled into Asia overnight to make for a poor start to the new trading week.”
“Sentiment remains dented by politics following the UK’s hung parliament and shift in the balance of UK political power, although a bounce in GBP from its election-result lows is reversing Friday’s FX boost to the FTSE’s international exposure.”
On an individual basis, the FTSE’s biggest loser so far is IT and software firm Micro Focus, down close to 2.4%, dragged lower by negative sentiment surrounding the tech sector after the end of last week. Newcastle-based software firm Sage is also suffering, down 2.1%.