Industry Updates

UK ETFs boosted after Labour win landslide

Historic majority was largely priced into markets

Theo Andrew

Labour Starmer

ETFs tracking UK equities bounced on the morning of 5 July after Labour sealed a landslide election victory over the Conservatives.

The FTSE 100 index was up 0.45% in early trading before falling back, while the FTSE 250 was up 1.2%, as at 9.28am, as markets reacted to the news of a first Labour government for 14 years.

The iShares MSCI UK Small Cap UCITS ETF (CUKS) was up 1.8%, followed by the iShares FTSE 250 UCITS ETF (MIDD) which rose 1.1% as investors put more confidence in the UK’s future prospects.

The largest UK equity ETF, the £11.7bn iShares Core FTSE 100 UCITS ETF was up 0.26%.

It comes as a Sir Kier Starmer Labour victory was already mostly priced into markets, the FTSE 100 is up 7% year to date, with the pound also moving little on the news.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “It is a Labour landslide victory bringing in a political new guard which has vowed to make big changes to the UK economy, but given poll forecasts the result has caused few ripples on financial markets.

“The FTSE 100 was in positive territory in early trade and the pound was largely unchanged against the dollar, as the exit polls came in and lifted only very slightly as the overall result became clear, hovering around $1.276.”

Investors hope the result ushers in a new era of financial stability for the UK, which become Europe’s most valuable market for the first time in almost two years last month as France enters a period of political uncertainty.

Eyebrows might be raised at the manor of the victory, with the party only having to marginally increase their vote share to achieve the historic victory.

Lindsay James, investment strategist at Quilter Investors, said: “So far the financial market response has been fairly muted with the pound holding on to recent gains overnight.

“Businesses and investors have foreseen this result for some time and have been comfortable with the messages that have emanated from Labour. It will not want to upset the apple cart, although now it is in power it will be interesting to see how much they deviate.”

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