The Monday note - 12 June 2017

• The FTSE 100 closed on Friday at 7,527.3, down 20 points on a week earlier, as political uncertainty dampened investor appetite for risk. The ten year Gilt yield stood at 1.00%. 
• The pound fell against the US dollar on news of a hung Parliament, dropping from $1.29 on Thursday to just over $1.27 on Friday. However, as recently as mid-March sterling was trading at around the $1.21 mark. 
• Spanish bank, Santander, bought domestic competitor, Banco Popular, which was on the brink of collapse. The sale was arranged by an ECB agency, with Popular’s shareholders and junior bond holders losing their investments. 
• The UK’s trade deficit in April narrowed to £2.1 bn, down from £3.9 bn in March, due to lower imports of machinery, cars and oil. 

Chief Economist comments: 

I seem to be out of step with the national mood, because I am happy with the election outcome. There is now talk that the UK might stay in the EU’s customs union, a second Scottish independence referendum is in the long grass, and the government is going to be restricted to non-controversial policies. As for discussion of another election, with places like Kensington and Canterbury going Labour, I doubt many Conservative MPs will want another poll this year. These realities will sink in over the summer months, then I see investors taking advantage of the cheap pound, and buying UK property this autumn.