UK markets rally as Conservatives head for election victory
By Jamie McGeever
LONDON May 8 (Reuters) - British stocks were called to open sharply higher and sterling surged on Friday as early British election results showed Prime Minister David Cameron's Conservatives poised to return to power without the need of a formal coalition.
Initial results confirmed the shock results of an exit poll late on Thursday, appearing to remove any chance of the hung parliament that had worried financial investors in the run in to Thursday's vote.
With Cameron's Tories generally perceived to be more market-friendly than the opposition Labour Party, the FTSE 100 was poised to re-test its recent highs. Sterling was on course for its biggest daily rise against the euro and dollar since 2009.
"The odds were stacked against such a decisive outcome. This result is far less complicated than the markets' worst fears," said Bill O'Neill, Head of the UK Investment Office at UBS Wealth Management.
But while the short-term political risks may have diminished, the longer-term risk of Britain holding a referendum to leave the European Union remains, particularly for sterling.
"We have some of the near-term political risks being removed but there are a couple of factors that are going to work against sterling for the longer term," said Ian Stannard, senior currency strategist at Morgan Stanley in London.
"The risks of an EU referendum will come into focus and fiscal austerity under the Conservatives may also mean that the Bank of England keeps interest rates lower for longer."
Sterling jumped more than 1 percent against the dollar to trade above $1.55 for the first time since late February, and rallied 2 percent against the euro to 72.40 pence per euro. Continuación...