London open: Stocks rally as pound slumps on hung parliament result

London's blue chip stocks rallied in early trade, underpinned by a weaker pound after the Tories lost their majority in a general election that resulted in a hung parliament.

At 0830 BST, the FTSE 100 was up 1.2% to 7,539.76, while the pound was down 1.6% against the euro at 1.1369 and 1.9% versus the dollar at 1.2705 as Prime Minister Theresa May's gamble on a snap election to give her a stronger mandate in Brexit negotiations backfired in spectacular fashion, leaving her future in doubt. Brexit negotiations are due to begin on 19 June but EU budget commissioner Gunther Oettinger already said on Friday that there will be no negotiations without a government.

With around 70% of its constituents deriving their earnings from overseas, the main FTSE benchmark tends to benefit when sterling weakens. However, its more domestically-focused little sister, the FTSE 250, was down 0.4% to 19,661.96.

With the Conservatives predicted to win 318 seats and Labour 262, May has fallen short of the 326 seats needed to deliver a majority Conservative government in the 650-seat House of Commons. With 646 out of the 650 seats declared, the Tories were on 315 while Labour had 261 seats. As it stands, the Tories could try to assemble a coalition with Northern Ireland's right-leaning Democratic Unionist Party to gain a majority, or govern as a minority and risk having their legislation voted down.

May is due to make a statement at 1000 BST, with some expecting her resignation while others believe she will pledge to form a working coalition.

Azad Zangana, senior European economist at Schroders, said: "This is a disastrous result for the Conservative party, which must raise questions over the future of Theresa May as Prime Minister. As the largest party following the election, the Conservatives are likely to remain in power as a minority government, relying on the confidence and supply of votes from friendly opposition members of parliament. This suggests a less stable government, one that will have to make concessions and seek a consensus even when introducing simple changes to legislation.

"For the economy, households and corporates will be concerned by the increased political uncertainty. However, at the same time, the paralysis in Westminster will mean fewer changes to fiscal and economic policy. Despite this, we expect a pullback in household spending and business investment which will exacerbate the slowdown currently being experienced."

Housebuilders suffered the heaviest losses, with Taylor Wimpey, Land Securities, Persimmon, Barratt Developments and Hammerson all in the top 10 fallers as analysts argued that increased political uncertainty would slow house purchases and make the sector less appealing.

In corporate news, Centrica gained ground as it announced that the CQ Energy Canada Partnership, the Canadian E&P joint venture in which it owned a 60% interest, was to be sold to a consortium comprising MIE Holdings Corporation, the Can-China Global Resource Fund and Mercuria for a purchase price of CAD 722m (£413m) in cash.

Petrofac was trading a little higher as Kepler initiated coverage of the stock at 'buy' saying the market has overreacted to the Unaoil scandal.

On the data front, industrial production and manufacturing production figures are at 0930 BST, along with the goods trade balance.

Market Movers

FTSE 100 (UKX) 7,539.76 1.21%
FTSE 250 (MCX) 19,661.96 -0.41%
techMARK (TASX) 3,606.50 0.75%

FTSE 100 - Risers

Centrica (CNA) 205.00p 3.12%
Ashtead Group (AHT) 1,690.00p 3.05%
Diageo (DGE) 2,353.00p 2.98%
CRH (CRH) 2,876.00p 2.64%
Fresnillo (FRES) 1,708.00p 2.58%
Unilever (ULVR) 4,373.00p 2.44%
Reckitt Benckiser Group (RB.) 8,041.00p 2.41%
Rolls-Royce Holdings (RR.) 909.00p 2.36%
Wolseley (WOS) 5,005.00p 2.33%
Scottish Mortgage Inv Trust (SMT) 417.10p 2.23%

FTSE 100 - Fallers

Taylor Wimpey (TW.) 176.20p -3.98%
ITV (ITV) 179.20p -3.76%
Lloyds Banking Group (LLOY) 68.14p -3.65%
Land Securities Group (LAND) 1,032.00p -3.46%
Persimmon (PSN) 2,335.00p -3.15%
Barratt Developments (BDEV) 572.50p -2.97%
Sky (SKY) 959.50p -2.84%
Intu Properties (INTU) 258.40p -2.71%
Hammerson (HMSO) 575.00p -2.71%
Marks & Spencer Group (MKS) 357.10p -2.62%

FTSE 250 - Risers

Weir Group (WEIR) 1,920.00p 3.06%
Kaz Minerals (KAZ) 512.50p 2.56%
Genesis Emerging Markets Fund Ltd Ptg NPV (GSS) 673.00p 2.44%
Templeton Emerging Markets Inv Trust (TEM) 703.50p 2.33%
Alliance Trust (ATST) 712.00p 2.08%
JPMorgan Emerging Markets Inv Trust (JMG) 813.00p 2.01%
JPMorgan American Inv Trust (JAM) 389.70p 1.99%
Monks Inv Trust (MNKS) 714.50p 1.93%
Polar Capital Technology Trust (PCT) 1,047.00p 1.85%
Scottish Inv Trust (SCIN) 814.50p 1.75%

FTSE 250 - Fallers

Great Portland Estates (GPOR) 590.00p -4.61%
Travis Perkins (TPK) 1,539.00p -4.11%
Crest Nicholson Holdings (CRST) 585.50p -4.10%
Howden Joinery Group (HWDN) 436.00p -4.07%
Berkeley Group Holdings (The) (BKG) 3,077.00p -4.05%
Capita (CPI) 520.50p -3.97%
McCarthy & Stone (MCS) 170.30p -3.84%
Go-Ahead Group (GOG) 1,702.00p -3.51%
Bovis Homes Group (BVS) 892.50p -3.36%
Greene King (GNK) 697.50p -3.26%