Britain's pound dives after UK election shock, lifting main FTSE shares

Britain's pound tumbled as much as 2.5 percent on Friday, lifting the country's main FTSE share index, following an election that denied any party a majority in parliament and fomented political chaos just days before Brexit talks begin. 

With no clear winner emerging from Thursday's election, Prime Minister Theresa May signaled she would fight on and try to form a government, despite having failed to win the stronger mandate she had sought to conduct exit talks with the rest of the European Union.

The surprise result raised questions about how Britain will advance with its plan to leave the EU, and whether any party can form a stable government, It sent the pound to eight-week lows against the dollar and its lowest levels in seven months versus the euro. GBP=D3 EURGBP=D3

But having slid to as low as $1.2636 in early European trade, sterling was at $1.2740, apparently taking some support from news that Northern Ireland's Democratic Unionist Party will back May's Conservatives in forming a government.

That still left sterling down 1.7 percent against the dollar on the day and on track for its biggest one-day fall since last June, though that move was dwarfed by an almost 8 percent dive the day after last June's EU referendum.

But the earlier trough in sterling merely left the currency around where it had been trading before May called the election on April 18.

A hard Brexit is one on which Britain leaves the EU's single market and customs union, a matter of deep concern for many businesses. 

Weaker sterling gives FTSE edge over Europe, Micro Focus dips

The pound's retreat below $1.30 helped Britain's main share index outperform European benchmarks on Monday, while individual broker updates sent some stocks lower.

Sterling fell after two polls on the weekend showed Prime Minister Theresa May's ruling Conservative party losing ground after parts of its election manifesto came under fire. The pound had risen in the last month as some expected a landslide win would allow for smoother exit negotiations with the European Union.

Along with strength in commodities stocks, the weaker pound propelled the mainly foreign-earning FTSE 100 to a 0.4 percent gain, holding near record high levels hit last week, and easily outperforming the Euro zone STOXX 600 which fell 0.2 percent.

Strong metals prices helped miners Anglo American, Fresnillo, Antofagasta and Rio Tinto up to the top of the index, gaining 1 to 1.3 percent.

While merger activity drove European shares, broker updates fuelled the biggest moves among British stocks.

Micro Focus fell 3.1 percent, the top FTSE faller after Credit Suisse research into legacy technology led them to downgrade the firm.

The bank's survey of 100 CIOs found the industry was moving away from COBOL, a programming language widely used in business and finance, and the base for some Micro Focus tools and products.

Testing company Intertek jumped to a record high after Kepler Cheuvreux upgraded it to a 'buy' in a note predicting an inflection in the cycle for the sector.

Euro steady below three-week high, focus on French election

The euro inched higher in early European trade on Friday but remained almost a cent off this week’s highs as investors battened down the hatches for results of the first round of a tightly-fought French presidential election.

Traders said an upbeat flash purchasing manager survey from France, added to polls showing centrist Emmanuel Macron still in pole position ahead of Sunday's voting had again been enough to settle nerves after a dip late on Thursday.

There was no obvious reaction to the shooting of a French policeman in central Paris overnight, an attack claimed by Islamic State, the euro climbing around 0.2 percent by 0834 GMT to $1.0734.

Options markets EURVOL= suggest investors remain worried about strong results for far right candidate Marie Le Pen and/or hard left challenger Jean-Luc Melenchon that would point to the risk of another major political shock for Europe in two weeks time.

In line with the run-in to the U.S. election and Brexit referendum last year, most investors looked to have moved to minimize their exposure going into the vote.

Other major currency pairs were also stuck in tight ranges, the dollar easing just 0.1 percent against the yen and less than that against sterling.

All eyes in UK markets were on the morning release of UK retail sales numbers, likely to provide further evidence of a weakening of the consumer demand that has propped up economic growth since the Brexit vote last June.

The pound surged 4 cents on Tuesday after Prime Minister Theresa May shocked the country by calling an early general election for June 8.