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UK election results punish sterling in Asia

Friday 03:10 BST

Overview

The pound fell to its lowest level in more than a month on Friday in Asia as results from a UK general election called by Prime Minister Theresa May pointed to the possibility of a hung parliament, with UK-exposed stocks among the worst performers in the region.

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The pound was suffering in morning Asia trading, down 1.4 per cent against the dollar at $1.2775 as a number of key seats from the general election were due to be called soon. It was down 1.3 per cent against the euro at £0.877, Japan’s yen at ¥140.671 and the Australian dollar at A$1.6942.

Sterling had also lost 1.6 per cent against the South African rand, South Korean won and Mexican peso. It was off 1.5 per cent against the Brazilian real and Canadian dollar, and down 1.3 per cent against the Swiss franc.

The losses came as the ruling Conservatives appeared on course to lose their majority, potentially leading to the first hung parliament since 2010. Sterling had surged on the decision to hold the general election in April, amid hopes then that the Tories would boost their majority.

Equities

Asia Pacific equities were mixed, but UK-exposed stocks were down across most markets.

Hong Kong’s Hang Seng was down 0.3 per cent. Among the worst performers were UK-exposed businesses owned by billionaire Li Ka-shing, with Power Assets down 1.4 per cent, Cheung Kong Infrastructure off 1.8 per cent and CK Hutchison down 1.3 per cent. Those offset gains of 1.6 per cent by China tech giant Tencent.

In Australia the S&P/ASX 200 was up 0.2 per cent as energy stocks continued to reel from falling oil prices, falling 1.5 per cent. Shares in Woodside Petroleum were off 1.5 per cent, while Caltex Australia had shed 1.3 per cent.

Shares in Janus Henderson, an Australian-listed but UK-focused fund manager, were down 2.4 per cent, while Sydney-listed shares in UK bank CYBG were off 1.8 per cent, both among the worst performers in the index.

Japan’s Topix index was up 0.3 per cent as a 1.9 per cent rally in telecoms stocks was offset by falls of around 0.6 per cent in the healthcare and consumer staples segments. But the price-focused Nikkei 225 was up 0.8 per cent, thanks in large part to gains of as much as 7.9 per cent from SoftBank, which announced it would buy robotics group Boston Dynamics from Google owner Alphabet.

Forex

The dollar was making gains against a number of its peers, though none so great as those against the pound. The dollar index tracking the greenback against a basket of global currencies was up 0.4 per cent at 97.278.

Japan’s yen was down 0.2 per cent at ¥110.17 per dollar, while the euro shed the same amount to $1.1198.

The Australian dollar was off 0.1 per cent against its US counterpart at $0.754

Fixed income

Government bonds in Asia Pacific were making minor gains amid a mixed performance from stock markets and forex tumult.

The yield, which moves in the opposite direction to price, on 10-year US Treasuries was down 1 basis point at 2.183 per cent, while that on the equivalent Australian government note was flat at 2.398 per cent.

Yield on Japanese government bonds was down 1bp at 0.048 per cent. The only marked loss came from the 10-year South Korean government bond, which saw yield up 2bp at 2.164 per cent.

Commodities

Crude oil prices were steadying in Asia trade on Friday morning after a choppy Thursday session. Brent crude, the international benchmark was up 0.1 per cent at $47.89 a barrel. West Texas Intermediate, the US marker, was trading flat at $45.65.

Gold saw little benefit from its haven status despite a falling pound, as the price for one ounce of the yellow metal shed 0.3 per cent to $1,274.75.

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