Global markets take in stride Comey and ECB, but the pound takes a hit from UK poll result

PUBLISHED : Friday, 09 June, 2017, 6:01am
UPDATED : Friday, 09 June, 2017, 6:17am

Global stocks took in stride Thursday’s blockbuster testimony from former FBI chief Jim Comey and an incrementally more optimistic stance by the ECB, but the British pound tumbled after an exit poll suggested a hung Parliament in the UK.

The triad of big events involving Britain, the US Congress and the European Central Bank had earned the moniker “Super Thursday,” but produced no obvious pattern in global stocks, with London retreating, Paris flat, and Frankfurt and New York gaining modestly.

But the British pound fell sharply late Thursday afternoon after an exit poll following the general elections suggested conservative Prime Minister Theresa May’s party could lose its parliamentary majority.

May’s election gamble flops as UK is headed for hung parliament

Sterling was down nearly 2 per cent against the dollar from the day-ago level at US$1.2719.

“It’s going to be close, and results will come out through the night, but this is going to leave Theresa May struggling to keep control of the Brexit process,” said Kit Juckes, an analyst at Societe Generale.

On Wall Street, attention was focused on Comey’s testimony on his firing by President Donald Trump and links to the Russia investigation.

Comey testified that Trump asked him for “loyalty” and to drop a criminal investigation into former National Security Advisor Mike Flynn.

Ex-chief of FBI Comey testifies that Trump White House lied and ‘defamed’ him

Comey said he took painstaking notes of the extraordinary encounters for fear Trump might “lie” about the meetings, a step he did not deem necessary with earlier presidents.

While the testimony painted an unflattering picture of Trump, analysts said most of the information had been aired in press reports and the disclosures themselves were not disturbing enough to end the market’s bullish sentiment.

Comey himself declined to address whether Trump’s conduct constituted obstruction of justice, an impeachable offense.

“Based on what the stock market is doing, it did not see a smoking gun based on this testimony from Mr Comey,” said Patrick O’Hare.

Some legal observers have said Trump’s conduct as described by Comey constitutes obstruction of justice. But O’Hare said the market’s reaction suggested it was sceptical of that reasoning and still viewed tax cuts and other Trump growth measures as alive, along with his presidency.

The Nasdaq rose 0.4 per cent to a fresh record, while the Dow and S&P 500 finished barely positive.

ECB shuts door on cutting rates and inflation will stay soft for years so pumping cash needed

Earlier, the ECB decided, as expected, to keep its ultra-low interest rates unchanged and said it would continue its 60-billion-euro (US$67.4 billion) monthly bond purchases to December.

The central said it saw fewer risks to the eurozone economy as it increased its growth forecasts while cutting inflation estimates. It also dropped a long-standing commitment to slashing rates yet further if necessary.

“The central bank made every effort to retain a relatively neutral stance overall, balancing any hawkish or dovish statement with something roughly equal and opposite,” said market analyst Craig Erlam at OANDA currency traders.

“The fact that it no longer expects interest rates to remain at present ‘or lower’ levels is a clear deliberate signal that policy makers are gradually becoming more hawkish,” he added.