London stocks, pound surge as Cameron holds onto power

GMT 13:46 2015 Friday ,08 May

Arab Today, arab today London stocks, pound surge as Cameron holds onto power

Prime Minister David Cameron and his wife Samantha
London - AFP

London's stock market rallied and the pound surged on Friday as Prime Minister David Cameron's "business friendly" Conservatives claimed a surprise victory in Britain's general election.

The benchmark FTSE 100 index jumped 1.83 percent to stand at 7,013.0 points in midday deals, lifted by soaring share price gains for banks and energy majors.

Among the biggest winners were energy firm Centrica, up 7.50 percent to 276.70 pence and state-rescued Lloyds Banking Group, up 6.56 percent to 87.53 pence, with the Conservatives seen as being less tough on regulating the financial and energy sectors compared with the Labour party, which will stay as the main opposition party.

"The Conservatives are seen as being more business friendly and more importantly, offer continuity in a country that last year experienced the fastest rate of growth in the G7," Craig Erlam, senior market analyst at Oanda trading group, said Friday.
As the results rolled in, forecasts of a close contest between the Conservatives and Labour turned out to be wide of the mark, with Cameron on course to win a majority in parliament and secure five more years in Downing Street.

The outcome sent the British pound soaring to $1.5423 from $1.5262 late in New York on Thursday. The euro was down at 72.71 pence from 73.82 pence.

The European single currency fell to $1.1215 from $1.1266 on Thursday.

"A night of victory for the Conservative party has put UK markets on the front foot, with sterling and the FTSE moving higher," said Chris Beauchamp, senior market analyst at IG trading group.

"For investors, the results... mean that they can cease worrying about the UK economy, and focus on the other areas of concern, like Greece and whether the Fed will hike rates this year."

"The result removes the risk that the economy suffers a prolonged period of political uncertainty," said Vicky Redwood, chief UK economist at Capital Economics research group.
- Scotland, EU risks -

As well as the Conservatives, the other big winners were the pro-independence Scottish National Party, which won 56 of the 59 seats in Scotland.

The success of the SNP could increase pressure for a fresh referendum on Scottish independence, even though that was rejected just last September.

An overall victory for the Conservatives will meanwhile trigger a referendum on Britain's membership in the EU by 2017.

And Britain can expect more austerity as Cameron looks to further slash the country's huge deficit.

"Admittedly, a Tory victory means that the economy will have to endure a fairly aggressive renewal of the fiscal squeeze," said Redwood.
"On top of that, investment could suffer from uncertainty ahead of the referendum on UK membership of the EU that will presumably now take place. Meanwhile, the success of the SNP suggests that Scottish independence could also come back onto the agenda."

- US focus -

European market focus Friday was also firmly on the United States, with the world's biggest economy publishing key monthly jobs data.

In afternoon deals, Frankfurt's DAX 30 stocks index was up 0.56 percent to 11,472.00 points and the CAC 40 in Paris won 0.76 percent to 5,004.90 compared with Thursday's closing levels.
"While investors in the UK will no doubt be focussed on events in London there is also the added complication of the latest US employment report for April, which could go some way to gate crashing events today," said Michael Hewson, chief market analyst at CMC Markets UK.

"Today’s numbers are even more important in the context of the recent slowdown seen in the US economy in the first quarter of this year, which has put back rate hike expectations in to the second half of this year and in the process sent the US dollar tumbling."


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