Early election in the UK triggers plunge in group global markets
Casting an eye across global markets it was a sea of red as the Dow came off on the back of poor earnings results from Goldman Sachs Group and Johnson & Johnson. While the face-off with North Korea tended to take a back seat there were other political tremors that impacted European markets and no doubt contributed to some of the 0.5% decline in the Dow which closed at 20,523 points. Negative leads initially came out of China with the Hang Seng falling 337 points or 1.4%. This flowed into the Australian market and then buffeted European markets. However, uncertainty in the UK was exacerbated as Prime Minister, Theresa May announced an early election which will occur on June 8.
This adds to the political uncertainty in the region with elections also taking place in France and Germany this year.
The FTSE 100 plunged 2.5% to 7147 points after the early election was announced.
The Paris CAC 40 also fell sharply, down 1.6% to 4990 points. The DAX wasn’t as severely affected, but the 0.9% drop saw it pullback to the 12,000 point mark.
The negative trends extended into commodities markets as iron ore continued to fall, oil fell 0.5% and even the normal safe haven appeal of gold wasn’t enough to prevent it from coming off slightly.
This broad-based sell-off is often an indication that a bearish market isn’t far away, as it is a sign that investors are looking to take their money off the table, opting for safer asset classes until a sense of certainty returns.
With these trends potentially pointing to a contraction in economic growth it wasn’t surprising to see a sharp sell-off in base metals. Copper closed at US$2.51 per pound, a level it hasn’t hit since the start of 2017.
In comparative terms, nickel’s close of US$4.19 per pound was even more alarming as it represented a circa ten-month low.
Zinc closed at US$1.13 per pound, taking it back to December/January levels.
Lead’s fall of nearly 6% was significant as it represented most of the gains made in 2017.
On the currency front the Australian dollar is fetching US$0.755.
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