With the UK general election playing out as expected last week the stock market responded positively, especially the more domestically-focused FTSE 250 mid-cap index which notched up a 2.5% gain over five days.

Interestingly, it wasn’t housebuilders which led the gains – despite much talk of Labour’s pledge to free up the planning system and build 300,000 new homes per year – but stocks which had lagged the most, in particular smaller financials such as abrdn (ABDN), Bridgepoint (BPT), Close Brothers (CBG), OSB Group (OSB) and TBC Bank (TBCG).

Across the Channel, investors’ fears of a hard-right government were allayed as Marine Le Pen’s National Rally party came third in the polls behind the far-left New Popular Front and incumbent president Emmanuel Macron’s centre-left party.

Although the result suggests political deadlock, with no party able to form an outright majority, the positive news as far as markets are concerned is the fact the far-right vote was much lower than expected.

President Macron’s position is undoubtedly weakened, but the outcome doesn’t directly affect his role as he still has another three years of his term left which is another positive factor.

In terms of macro events, June’s US non-farm payroll report was something of a non-event for a change: although the figure came in above estimates at 206,000 jobs, given the significant downward revisions to the April and May numbers it is clear the Fed’s policy of keeping rates higher for longer is having an effect on the employment market.

Core consumer prices will be in focus this week and next week in the UK, Europe and the US, but the main area of interest looking ahead will be whether the ECB (European Central Bank) follows up on its June interest rate cut with another 0.25% reduction on 18 July. 

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