Pound volatile after mixed polls, while FTSE 100 slips from record high - as it happened

The recovery in the pound has left the FTSE 100 in the red after the index earlier hit a new all time peak, and it was a fairly mixed picture elsewhere. With Wall Street falling back, European markets had an uncertain feel about them, with concerns about the forthcoming elections, not just in the UK but in Germany and perhaps Italy too. But despite this, they did manage to record their fourth straight month of gains, with the pan-European Stoxx 600 index up 0.9% in May. The final scores showed:

• The FTSE 100 finished down 6.56 points or 0.09% at 7519.95
• Germany’s Dax edged up 0.13% to 12,615.06
• France’s Cac closed 0.42% lower at 5283.63
• Italy’s FTSE MIB fell 0.4% to 20,731.68
• Spain’s Ibex ended up 0.03% at 10,880.0
• In Greece, the Athens market dipped 0.10% to 775.24

On Wall Street, the Dow Jones Industrial Average is currently down 40 points or 0.19%.

On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.

Here’s Reuters on the correction to the earlier Chicago purchasing managers’ report:

The initially reported headline figure for the Chicago PMI was apparently incorrect and Market News International has “revised” it to 59.4 from 55.2 first reported. The update changed the entire complexion of the original report and renders earlier market analysis largely inoperative. It took the headline index from an initial report of a 4-month low to being a 30-month high. MNI removed the original May release from the ISM-Chicago website but did not explain its error.

More on the UK election opinion polls:

A recovery in the pound on the latest opinion poll news has taken the shine off the FTSE 100.

Sterling is currently up 0.34% against the dollar at $1.2903, up from its low of $1.2767. The late positive run for the currency has seen the FTSE 100, which hit an intra-day high of 7586, slip into the red at the close, down 0.09% at 7519.95.

Neil Wilson, senior market analyst at ETX Capital, said:

Sterling is flying at month end. Some month-end positioning and new polls showing a renewed Tory lead helped lift the pound over the $1.29 handle, amid signs that trading in sterling will be fairly choppy in the coming days.

It looks like the foreign exchange market has decided to shrug off that YouGov survey which indicated a hung parliament is the most likely outcome from the June 8^th poll.

Instead the pound was buoyed by a PanelBase poll that gives the Tories a very healthy 15-point lead over Labour. Following on from this a Kantar poll added to the positive sentiment after it revealed the Conservative share of the vote had ticked up one percentage point in the last week, to 43%.

Meanwhile there are reports that the Chicago data from earlier has been corrected.

The purchasing managers’ index was initially said to have fallen from 58.3 to 55.2, but now it has apparently been revised to show a rise to 59.4.

Connor Campbell, marketing analyst at Spreadex, said:

You can tell the election is just over a week away, as the market has been abuzz with volatility this Wednesday afternoon.

In the UK polls have continued to be the main driver of trading, with the UK markets remarkably sensitive to each individual survey. The latest report came from PanelBase, which gave Theresa May’s Tories a 15-point lead over Labour, news that not only helped the pound erase its losses against the dollar, but sent the FTSE to a fresh all-time high. The fact that the pair moved in the same direction is notable, suggesting that the FTSE wants a Tory win just as badly as sterling, even if the weakened pound has been the main driver behind the UK index travelling to its current record levels.

Things have calmed down since then, however. The FTSE has reverted to the 20 point rise it saw this morning, leaving it 40 or so points away from its intraday peak. As for the pound, while it has held onto its growth against the greenback, it still finds itself in the red against the euro, though sterling has lifted away from its 2 and a half week lows.

Sterling has now recovered all its lost ground against the dollar, as a new poll from Kantar shows the Conservatives increasing their lead over Labour from 8 points to 10 points.

Sterling is now 0.2% better at $1.2882 having earlier fallen as low as $1.2767. Against the euro the pound has recovered to €1.1476, down 0.16% after being as low as €1.1432.

Meanwhile the FTSE 100 has fallen back from its record highs and is now up just 20 points or 0.27%.

Back with the UK, and ratings agency Moody’s has raised its forecast for economic growth this year but warns Brexit related uncertainty will have an effect eventually. It said:

The British economy grew at a quarterly annualised rate of only 0.8% in the first quarter of 2017. Consumer spending, which has been a strong driver of growth since mid-2016, is slowing as a rise in inflation squeezes real wages.

We expect that the UK economy will grow around 1.5% this year, slowing further to 1% in 2018 owing to a slowdown in investment amid Brexit-related uncertainty.

The upward revision to our 2017 forecast from 1% previously recognises that the speed of the slowdown so far has turned out to be more moderate than we had previously estimated. Otherwise, we have not fundamentally changed our view that post-Brexit uncertainty will eventually weigh on economic activity.

The agency’s other key points in its latest global assessment include:

• The improving outlook for global growth in 2017 appears to be sustainable as some of the biggest risks to advanced economies have subsided and emerging markets maintain their expansion.
  
• Moody’s expects G20 economies, which account for 78% of the global economy, to collectively grow at an annual rate of 3.1% in 2017 and 2018, compared with growth of 2.6% in 2016.
  
• The potential damage to global trade and economic growth from a pursuit of protectionist policies in the US, and consequent retaliation, seems to have diminished for now.
  
• Moody’s expects the ongoing recovery to continue in 2017 and 2018, supported by accommodative monetary conditions, a strengthening global economy and rising employment.
  
• The outcome of the French presidential election should also support recovery because it significantly reduces the risk of a European Union exit by a major economy.
  

Another set of US data has missed expectations.

Sales of previously owned US homes fell by 1.3% in April, compared to forecasts of a 0.5% rise. This is the second straightly monthly decline, according to the National Association of Realtors.

The year on year fall was 3.3%, the first decline since December and the largest since June 2014. The association’s chief economist Lawrence Yun said:

Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market. Realtors are indicating that foot traffic is higher than a year ago, but it’s obviously not translating to more sales.

Prospective buyers are feeling the double whammy this spring of inventory that’s down 9.0 percent from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income.

Despite Canada’s impressive economic growth in the first quarter, the International Monetary Fund points to possible problems ahead:

In the wake of the poor Chicago data, US markets have gone into reverse.

The Dow Jones Industrial Average is currently down 34 points or 0.17%, while the Nasdaq composite - have earlier hit a new high - has now slipped around 0.1%. The S&P 500 is also down a similar amount.

Over in the US, and a disappointing outcome from the latest Chicago purchasing managers’ index:

This is the slowest rate of growth since January.

Here’s a chart showing how the UK was the joint-slowest G7 economy in the first three months of this year:

Over in New York, the Nasdaq has just hit another record high at the start of trading.

City traders are catching their breath after a busy morning of sterling volatility, and another record high on the FTSE 100.

Fawad Razaqzada, market analyst at Forex.com, sums up the morning:

What a comedy show this is turning out to be. Last night saw sterling tumble after research by the Times newspaper and YouGov suggested that there could be a hung parliament. Today, it retraced all of those losses after a Panelbase Poll showed that the Conservatives’ lead was not only intact but that it had risen to 48% from 47% previously, while the Labour party remained unchanged at 33%.

Razaqzada adds that we should “get used” to the volatility.

Sterling is currently reacting negatively to any narrowing in the polls between the two major parties mainly because of the threat of Labour’s promise of corporation tax increases, which is deemed by the market as growth-chocking and not so business-friendly.

If new polls show support for Theresa May is falling then the pound could fall once again, and vice versa. It is as simple as that. Thus, UK data should continue to play second fiddle to politics until the elections are over.

Meanwhile, the stock market is enjoying its best month of 2017. Selling in May and going away wouldn’t have paid off this year, yet anyway......

View image in fullscreen

Newsflash: Canada’s economy grew by an impressive 0.9% in the first three months of this year, outpacing other advanced economies.

Household spending and business investment helped to drive growth across the country in January to March, new figures show.

It’s a little weaker than expected; some economists forecast growth of above 4%. But it’s still means the Canadian economy is expanding at a healthy pace.

Canada is the final member of the G7 to report its growth figures. And we can now see that the United Kingdom is officially the joint-worst performing member of the G7 so far this year.

Britain’s GDP only expanded by 0.2% in the first quarter of 2017, as rising inflation and weak net trade dragged the economy back. That was a much sharper slowdown than feared.

Figures released last week showed that Britain’s “consumer facing industries” suffered a slowdown, exports fell, and the dominant service sector struggled as the weaker pound pushed up import prices.

Here are the growth rates for the G7 members in the first quarter of this year:

• Canadian GDP: +0.9% growth
• German GDP: +0.6% growth
• Japanese GDP: +0.5% growth
  
• French GDP: +0.4% growth
• US GDP: +0.3% growth
• UK GDP: +0.2% growth
• Italian GDP: +0.2% growth