(Adds close of U.S. markets)
* British election sees government losing majority
* Pound falls to two-month low around $1.27 in erratic trade
* Wall Street hits new intra-day highs before paring most
* Selloff in technology shares knocks Nasdaq, S&P 500 lower
By Herbert Lash
NEW YORK, June 9 The British pound fell to a
seven-week low on Friday after a shock election result cast
doubt on Britain's talks to leave the European Union, but key
indices hit fresh record highs before tumbling technology shares
drove the Nasdaq and S&P 500 lower.
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.
The benchmark FTSE 100 index of large British
multinationals fed off sterling's decline, as earnings from
abroad will be worth more from a weaker currency and gained 1
But some sectors seen as particularly sensitive to Brexit
instability saw heavy losses, such as homebuilders and real
estate investment trusts, which are seen as a barometer of
Brexit sentiment due to their holdings of London office space.
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 impact of the British election on the U.S. markets was
muted. The three major U.S. indices hit fresh intra-day highs
before tumbling shares of Facebook, Amazon, Apple, Microsoft and
Google parent Alphabet slammed the Nasdaq and S&P 500.
"Tech has been on a tear for a very, very long period of
time," said John Praveen, managing director for Prudential
International Investments Advisers in Newark, New Jersey.
A research note from Goldman Sachs on this year's surge in
technology shares has evoked unhappy memories for some investors
of the euphoria before the tech bubble burst in 2000.
Amazon, Apple Facebook had surged
year-to-date about 30 percent before Friday's selloff, while
Microsoft and Google had gained a bit less. They all fell more
than 3 percent, except for Microsoft, which slid 2.3 percent.
Investors have relied on almost $2 trillion that central
banks, including the Federal Reserve, have pumped into capital
markets over the past 12 months, which has driven up asset
prices, said Jack Ablin, chief investment officer at BMO Private
Bank in Chicago.
"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," Ablin said.
"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."
European shares closed higher, erasing early choppiness.
Britain's FTSE 100 index rose 1 percent, and the
pan-regional FTSEurofirst 300 index of leading European shares
rose 0.37 percent to 1,534.39.
MSCI's all-country stock world stock index <.MIWD00000PUS)
slid 0.04 percent as much of Wall Street retreated. Earlier,
Germany's DAX index rose 0.8 percent and the Nikkei 225
in Tokyo gained 0.52 percent.
The Dow Jones Industrial Average closed up 89.44
points, or 0.42 percent, to 21,271.97. The S&P 500 lost
2.02 points, or 0.08 percent, to 2,431.77 and the Nasdaq
Composite fell 113.85 points, or 1.8 percent, to
The pound shed more than 2 percent against the dollar,
dropping as low as $1.2636 before trimming losses.
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 0.36 percent at 97.269.
The euro was down 0.16 percent to $1.1194 against the
dollar, a day after the European Central Bank closed the door on
more interest rate cuts.
Oil prices rose after a pipeline stoppage in Nigeria, but
crude ended the week down nearly 4 percent on persistent worries
about global oversupply.
Brent crude oil settled 29 cents higher at $48.15 a
barrel, and U.S. crude rose 19 cents to settle at $45.83.
U.S. Treasury long-dated yields rose to one-week highs ahead
of next week's government debt auctions and a widely expected
interest rate increase by the Fed. U.S. short-term yields also
advanced, with two-year Treasuries touching a four-week peak.
Investors largely shrugged off the British election, as well
as scathing congressional testimony on Thursday by former
Federal Bureau of Investigation director James Comey.
Comey accused President Donald Trump of firing him to try to
undermine the bureau's investigation into possible collusion
between his 2016 presidential campaign team and Russia.
U.S. 10-year Treasuries were last down 4/32 in
price to yield 2.2093 percent.
(Reporting by Herbert Lash; Editing by Nick Zieminski)