(Updates trading, adds comments; changes byline, dateline,
* British election sees government losing majority
* Pound falls to two-month low around $1.27 in erratic trade
* Oil's price fall stalls despite supply glut
By Herbert Lash
NEW YORK, June 9 The British pound plunged to a
seven-week low on Friday after a shock election result cast
doubt on Britain's talks to leave the European Union, but global
equity markets rallied with key indices on Wall Street hitting
new record highs.
British Prime Minister Theresa May said she would form a
government backed by a small Northern Irish party after her
Conservative Party lost its parliamentary majority in a vote on
Thursday just days before the EU departure talks begin.
After an initial plunge, sterling pared losses against the
dollar and euro, while the dollar gained.
Safe-haven gold and prices of U.S. Treasuries drifted
The pound shed more than 2 percent against the dollar,
dropping as low as $1.2636 before trimming losses.
The impact of the British election on the U.S. markets was
"Markets are celebrating gridlock again, which is a reversal
of what we saw after the U.S. election," said Jack Ablin, chief
investment officer at BMO Private Bank in Chicago.
Ablin said over the past 12 months, central banks, including
the Federal Reserve, have pumped almost $2 trillion into capital
markets, which has driven asset prices higher.
"If there's one metric that I'm going track, to determine
whether or not I want to stay engaged in risk-taking, it's going
to be that liquidity. If I get a sense the Fed or other central
banks will start to close up shop on that, we're going to reduce
risk," Ablin said.
Equity market rallied, with European shares closing higher
after early signs of skittishness. Britain's FTSE 100 index
rose 1 percent, and the pan-regional FTSEurofirst 300
index of leading European shares rose 0.36 percent to 1,534.20.
MSCI's all-country stock world stock index <.MIWD00000PUS)
gained 0.27 percent.
Stocks on Wall Street set new intra-day highs. The Dow Jones
Industrial Average rose 98.34 points, or 0.46 percent, to
21,280.87. The S&P 500 gained 10.14 points, or 0.42
percent, to 2,443.93 and the Nasdaq Composite added 3.30
points, or 0.05 percent, to 6,325.06.
The dollar rose to a 10-day high against a basket of
currencies. The dollar index, which tracks the greenback
against six major rivals, was up 0.42 percent at 97.322.
The euro was down 0.24 percent to $1.1185 against the
dollar, a day after the European Central Bank closed the door on
more interest rate cuts.
Oil prices steadied after falling sharply earlier in the
week on pressure from widespread evidence of a fuel glut despite
efforts to curb supply led by the Organization of the Petroleum
Brent crude oil rose 47 cents to $48.33 a barrel,
U.S. crude gained 40 cents to $46.04.
U.S. Treasury long-dated yields rose to one-week highs as
investors consolidated positions ahead of next week's government
debt auctions and a widely expected interest rate increase by
U.S. 10-year Treasuries were last down 7/32 in
price to yield 2.2198 percent.
(Reporting by Herbert Lash; Editing by Nick Zieminski)