Market volatility looks set to continue on Wednesday, ahead of a vote in Commons that will decide whether a snap election will take place in June.
The markets reacted strongly to the surprise news yesterday that Prime Minister Theresa May had decided to call an early General Election for June, with both the FTSE and the British pound dropping as traders take in the latest developments.
This morning Britain’s mid-sized companies shrugged off the election worries, with the FTSE 250 rising 1.04 percent to 19,498.86. Thomas Cook, Travis Perkins and Dixons Carphone were some of the biggest risers on the mid-cap market.
However the FTSE 100 has failed to recover with the same ease, losing all gains it has made since the beginning of 2017. The FTSE fell 180 points yesterday ad begun the trading day on Wednesday by shedding a further 18. It is currently down 0.09 percent 7,140.84 (1122GMT).
The pound dropped on the news yesterday but has since shown signs of recovery, as MPs prepare to debate May’s motion in Parliament. It is currently down 0.07 percent against the dollar and 0.05 percent against the euro (1124GMT).
The news on the General Election comes as the risk of a ‘disorderly’ Brexit falls, according to a research note from Morgan Stanley. The global bank have ruled out remaining part of the single market, saying:
“On Brexit, we expect the “sovereignty” red lines on UK control over borders, courts and laws, which were set out in the Lancaster House speech, to be put into the Conservative manifesto, effectively ruling out a Remain or EEA outcome.
“A Conservative government would then imply leaving the single market: either a WTO-like outcome where the UK re-establishes national control but at the cost of economic barriers with the EU, or a “clean Brexit” FTA outcome where the UK re-establishes national control while avoiding major barriers to business with the EU.”
However, it maintains the opinion that Brexit will continue to run smoothly, as it arguably has thus far.