Home Business News What a Labour win means for the financial markets

What a Labour win means for the financial markets

8th Jul 24 12:30 pm

Last Thursday the British public headed to the polling stations across the country to cast their votes for the General Election, which was the first time in four and a half years.

The election saw Labour win by a landslide, securing over 400 seats, which gives the party a sizeable majority in parliament.

From healthcare and the environment to the economy, policy changes by the new Labour government are set to impact all aspects of life.

With Labour’s victory, changes in the financial markets are also anticipated.

Kate Leaman, chief market analyst at AvaTrade said, “Labour’s electoral triumph is set to have a small impact on the financial markets as the party’s victory has been anticipated ever since the election date was announced.

“The FTSE 100 received a slight boost of 0.45% after the markets initially opened, but quickly dropped in the subsequent hours. Nevertheless, with inflation down to 2% and the UK economy growing 0.7% in Q1, the FTSE 100 has risen over 5% this year, surpassing 8,000 points and could hit 10,000 with stable politics.

“Historically, markets have shown negative reactions immediately after a Labour win, but this might change due to Labour’s current centrist policies that focus on growth and careful fiscal management. Since the election results were announced, mid-cap companies in the FTSE 250, which reflects the UK’s domestic economy, have reported larger gains, climbing higher and performing better than the international focused FTSE100.

“Looking ahead, Labour’s win in the UK general election may trigger mixed effects on the markets. Sectors such as banking, homebuilding food and retail could witness gains due to Labour’s policies aimed at political stability, affordable housing, and encouraging private sector investments. For instance, Labour’s housing plans might help stocks like Barratt Developments and Taylor Wimpey.

“However, transportation and energy sectors may face turbulence. With Labour’s intentions to nationalise the railways and increase the Energy Profits Levy, this could lead to difficulties in these industries.

“Nationalisation might burden transportation firms, while higher taxes and stricter regulations can impact energy companies​. These plans could hurt firms like Trainline and Severn Trent.

“Labour’s victory could also shape the future of crypto regulations as the party has shown interest in promoting technological innovation, including crypto, by proposing policies that may foster a more favourable regulatory environment for crypto businesses.”

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