FTSE 100 And Pound Rally On Tory Election Win

The FTSE 100 rallied strongly while the pound has made strides against the dollar and euro following the Conservative victory in the General Election.

The 'relief rally' - which reflected an end to fears of a hung parliament and days of uncertainty over a new Government - was felt first on the currency markets as sterling put on 2% against the dollar.

The blue-chip FTSE 100 index ended 2.3% higher at 7,046.82 points - close to the record high of 7,122.74 points reached last month.

A fall for the FTSE had been tipped until it became clear that David Cameron's Tories would lead the next Government.

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The Conservatives are generally seen within the investment community as more market-friendly than Labour, which endured the additional humiliation of shadow Chancellor Ed Balls losing his seat .

The top riser on the FTSE 100 for much of the day was Centrica - the owner of British Gas - which, like its 'big six' rivals, had faced the prospect of being placed under energy bill price freeze restrictions had Ed Miliband won the keys to Number 10.

Housebuilders, part-nationalised banks RBS and Lloyds and even bookmakers were also among the sectors enjoying solid gains.

Sports Direct - a large user of zero-hours contracts - rose 4.6%. It was seen as being under threat in the event of a Labour government.

Bill O'Neill, head of the UK Investment Office at UBS Wealth Management, told the Reuters news agency: "The odds were stacked against such a decisive outcome.

"This result is far less complicated than the markets' worst fears," he said.

But while the short-term political risks may have diminished for investors, the longer-term risk of Britain holding a referendum to leave the European Union remains, particularly for sterling, and attention may swing towards that possibility.

Ian Stannard, senior currency strategist at Morgan Stanley, said: "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.

"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."