London midday: Stocks drop as pound gains after PM announces snap election
London stocks slid on Tuesday while the pound gained ground after Prime Minister Theresa May announced plans to call a snap general election on 8 June.
At midday, the FTSE 100 was down 1.4% to 7,228.95, extending earlier losses, while the pound - which had dipped briefly on news that May was to make an unscheduled statement - rose 0.7% against the dollar to 1.2651. A stronger pound tends to dent the FTSE as around 70 of its constituents derive their earnings from overseas.
May, who had previously said she would not seek an early election, argued that a general election was needed to strengthen Britain’s Brexit negotiations. With 50 days to go before the vote, May said she needed an early election because opposition parties are opposed to her government’s Brexit plans, with the division in Westminster risking her cabinet's ability to make a success of the process.
She added: "I have concluded the only way to guarantee certainty and security for years ahead is to hold this election."
May would need two-thirds of MPS in the Commons to vote for an early election, and Labour leader Jeremy Corbyn has already suggested that he would back such a move.
Neil Wilson, senior market analyst at ETX Capital, said that on the current polling, the likelihood was that the government will get a more secure footing to push Brexit through.
“Calling an election early has a number of advantages for the PM. First it strengthens her hand in the Brexit negotiations at home and abroad. May wants to enter a very tough two-year process with as strong a mandate as possible, giving her a superior bargaining position in Brussels. It will make fighting Britain’s corner easier is she has a whopping majority in the Commons.
“Labour in incredibly weak at present and a thumping majority for the Conservatives is almost assured if they head to the polls in June. The Conservatives have a lead of around 21 points in the polls and an election now is the best chance to exploit this advantage before the Brexit negotiations get underway properly.”
On the geopolitical front, market participants will continue to eye any developments between the US and North Korea, after an attempted missile launch by North Korea on Sunday failed.
Heavily-weighted mining stocks were the worst performers as iron prices in China fell to their lowest level since November. Anglo American, Glencore, BHP Billiton and Antofagasta were all sharply lower.
In corporate news, Ashmore Group was in the red despite saying it returned to net inflows into its funds in the three months to the end of March as investors regained confidence in emerging markets. Assets under management increased by $3.7bn during the third quarter, comprising positive investment performance of $2.3bn and net inflows of $1.4bn.
Daily Mail & General Trust ticked lower after selling its US video sharing platform Elite Daily to Bustle Digital Group for an undisclosed sum.
Exeter-based airline Flybe Group nudged higher as it announced that its chief financial officer Philip de Klerk had resigned to take up the position of CFO at another unnamed company.
Bovis Homes got a lift after Jefferies upped the stock to ‘buy’. Esure and Hastings were cut cut to ‘equalweight’ at Barclays, while Foxtons was cut to ‘neutral’ at Citigroup.
There are no major UK data releases due, but in the US, housing starts and building permits are at 1330 BST.
FTSE 100 - Risers
St James's Place (STJ) 1,071.00p 0.47%
Legal & General Group (LGEN) 252.20p 0.24%
Kingfisher (KGF) 327.70p 0.21%
Rolls-Royce Holdings (RR.) 830.00p 0.18%
Bunzl (BNZL) 2,367.00p 0.04%
Sky (SKY) 982.00p -0.05%
Reckitt Benckiser Group (RB.) 7,440.00p -0.05%
Next (NXT) 4,188.00p -0.12%
Mediclinic International (MDC) 758.50p -0.13%
Randgold Resources Ltd. (RRS) 7,530.00p -0.13%
FTSE 100 - Fallers
Anglo American (AAL) 1,125.00p -3.85%
BHP Billiton (BLT) 1,221.00p -3.78%
Glencore (GLEN) 297.40p -3.77%
Antofagasta (ANTO) 809.50p -3.05%
BP (BP.) 457.25p -2.94%
Rio Tinto (RIO) 3,034.00p -2.79%
Royal Bank of Scotland Group (RBS) 222.10p -2.76%
Barclays (BARC) 207.25p -2.54%
Royal Mail (RMG) 413.40p -2.52%
Royal Dutch Shell 'B' (RDSB) 2,145.00p -2.17%
FTSE 250 - Risers
Indivior (INDV) 332.30p 2.18%
Fisher (James) & Sons (FSJ) 1,744.00p 2.11%
Ladbrokes Coral Group (LCL) 130.50p 1.56%
Softcat (SCT) 428.50p 1.52%
Howden Joinery Group (HWDN) 457.90p 1.28%
Bovis Homes Group (BVS) 921.50p 1.10%
Euromoney Institutional Investor (ERM) 1,121.00p 0.99%
Elementis (ELM) 294.50p 0.82%
UDG Healthcare Public Limited Company (UDG) 721.00p 0.77%
Berendsen (BRSN) 765.00p 0.59%
FTSE 250 - Fallers
Ferrexpo (FXPO) 145.50p -6.13%
Vedanta Resources (VED) 716.50p -5.79%
Evraz (EVR) 211.00p -4.78%
Kaz Minerals (KAZ) 435.00p -4.46%
JRP Group (JRP) 123.10p -4.13%
Petra Diamonds Ltd.(DI) (PDL) 130.60p -3.55%
CYBG (CYBG) 273.90p -3.08%
Hunting (HTG) 586.50p -2.98%
Hochschild Mining (HOC) 277.80p -2.83%
Tullow Oil (TLW) 222.60p -2.58%