Financial markets stormed ahead yesterday following the Tories’ shock outright victory on relief that the country is not facing the uncertainty of a hung parliament and another imminent election.
The FTSE 100 surged towards last month’s record high, adding nearly £40bn to Britain’s biggest listed companies as energy firms, banks and housebuilders all performed strongly.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Fall-out Friday has turned into Fabulous Friday for the UK stock market.
“The election result means we don’t face weeks of political wrangling, which has been positive for all stocks.”
The FTSE 100 Index rose 2.3 per cent, closing up 159.87 at 7,046.82.
The FTSE 250 mid-cap index hit a new record high before closing up 2.8 per cent, a rise of 487.97 to 17,935.93.
In currency markets, sterling performed strongly against the dollar and the euro.
“The pound has risen strongly on the back of the election result. A holiday budget of £1,000 will buy around 30 euros more than it would yesterday morning, so holiday makers can now afford a few extra jugs of Sangria,” said Mr Khalaf.
Chris Cummings, chief executive of TheCityUK, said: “Business likes certainty and following a majority win for the Conservative Party, the city looks forward to working with a strong and stable Government”
But investors were also eyeing political and constitutional challenges resulting from the vote that have the potential to damage the economy and share prices.
Conservative leader David Cameron has pledged to hold a referendum on Britain’s membership of the European Union within two years, while the Scottish National Party’s landslide victory north of the border may hasten another vote on independence there.
“A good General Election result for the UK economy, but not a good day for the United Kingdom,” said Richard Buxton, head of UK Equities at Old Mutual Global Investors.
“The scale of the SNP’s victory in Scotland, together with the scale of UKIP’s share of the national vote at over 12 per cent, confirms the extent to which we are an increasingly divided nation.”
The result was also positive for Government bonds.
Howard Archer, chief UK economist at IHS Global Insight said: “Gilts will benefit from the fact that the Conservatives will be able to press ahead with their plans to reduce the deficit more quickly than Labour would have done.”
The yield on benchmark 10-year UK Government bonds went up in price so the yield fell to 1.94 per cent, meaning the Government can borrow money more cheaply.
Shares in Yorkshire’s biggest companies shoot up: Page 24.