Leading UK shares fall to one month low

Mirroring losses in US and Asia, European shares start Thursday in red territory with FTSE leading the fall as election uncertainty dominates United Kingdom‏‏

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

With the possibility that election results might push the world’s fifth largest economy a step closer to leaving the European Union, investors are wary over United Kingdom shares and the country’s currency, the pound.    

The FTSE fell to one-month lows on Thursday, with what is set to be one of the UK’s closest national elections in decades taking place today. After hitting a record high of 7,122.74 points last month, the blue-chip index was down 1.4 percent at 6,834.69, marking its lowest level since the beginning of April. The FTSE gained around 4 percent since the beginning of 2015. 

The election uncertainty has had an even greater impact on the British pound than the stock exchange. The currency fell about 5 percent against the dollar to $1,5202. So far, the pound has been supported by the ongoing economic recovery and low interest rates.   

Election polls signal a tie between Prime Minister David Cameron’s right-wing Conservatives and the opposition left-wing Labour party. The Scottish National Party might emerge as the third biggest party, as well. 

Another issue bothering investors and creating uncertainty is a potential “Brexit” referendum, an election promise made by the Conservatives to hold a referendum on Britain’s membership of the European Union by the end of 2017 if they win the election. 

According to two respected German institutions, Bertelsmann Stiftung and ifo, a British exit from the EU could cost the UK as much as €300 billion, knocking 14 percent off its gross domestic product. 

Polls suggest no single party will be able to win an overall majority, making a coalition government the most likely result.

TRTWorld and agencies