Thursday 12 December 2019 10:12 am

European stocks creep higher ahead of General Election

European shares edged higher this morning as investors await the result of a momentous British election, as well as the outcome of Christine Lagarde’s first policy meeting as head of the European Central Bank (ECB).

The Conservatives are expected to win a majority of seats in the next parliament, but a poll released last night by Savanta Comres and the Telegraph showed the gap between the parties has narrowed. It had the Tories winning a three-seat majority.

Read more: General Election live: Party leaders head to the polls

Before that, investors will tune in to the ECB policy decision, where the governing council is expected to leave the deposit rate on hold at minus 0.5 per cent – a record-low level.

The FTSE 100 was 0.53 per cent higher by 10am. It was aided by a flat pound, which stood at $1.319 and €1.185.

Germany’s Dax index had risen 0.42 per cent, while France’s CAC 40 was 0.39 per cent higher. The pan-European Eurostoxx 600 was up 0.34 per cent.

Chris Scicluna of Daiwa Capital Markets said traders will be in the dark about the election until the exit poll at 10pm which gives an accurate indication of what the nation has decided. “There will be no new insights offered throughout the course of the European trading day.”

Investors and traders are confident the Conservatives will win a majority, as the polls indicate, and provide some clarity to the Brexit process and economy. However, caution has been creeping in in recent days.

Mikael Olai Milhoj, senior analyst at Danske Bank, said: “It is notoriously difficult to predict the outcome of the UK election due to the ‘winner takes all’ voting system.”

The ECB decision is the event most likely to move markets, although former IMF chief Lagarde is expected to leave interest rates and bond buying as they are.

Read more: General Election 2019: Tory lead over Labour shrinks in latest poll

The central bank will also publish updated macroeconomic predictions. They are expected to be gloomy for 2019 after a tough year, but show a slight pick up for 2020.

Jim Reid of Deutsche Bank said: “We do not expect significant amendments to be made to the previous set of forecasts, published in September, which anticipated a gradual pickup in GDP growth and inflation over coming quarters.”

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