Uncertainty and fears of a hung parliament had investors worried on Thursday, however positive developments in the election had a dramatic positive influence on financial results on Friday.
The UK stock market opened strong while the pound reached a healthy high Friday morning as British election results showed Prime Minister David Cameron’s Conservative Party attracting more votes than expected.
Upon the release of exit polls the British pound rallied as investors were no longer hesitant over the establishment of a new government. The pound rose by 1.2 percent to $1.544 from the earlier level of $1.5521. The FTSE 100 also climbed to 2 percent, led by energy and banking stocks.
After a controversial election with three party leaders stepping down, including Labour’s Ed Miliband, David Cameron claimed victory for a second term with 329 seats, securing an absolute majority in the parliament.
However, ratings agency Moody's said "If the Conservative Party's plan to hold a referendum on European Union membership results in the UK's exit, this could have consequences for the whole economy, including potentially for the sovereign rating, if the UK was unable to broadly replicate the benefits of membership."
The Conservative manifesto makes four pledges; to control migration from the EU by reforming welfare benefits, to reclaim unspecified powers from Brussels, to reform the system so national parliaments can work together to block EU legislation, and to end Britain’s commitment to “ever closer union” in Europe, Reuters reported.
The UK currency markets took the lead as the pound rose by 1.2 percent against the US dollar at $1.5438. In a similar fashion, the pound also climbed against the euro to €1.3735.