Financial markets react swiftly to Tory election win

Both UK shares and the value of the pound shot up following the Conservative win in the general election.

Traditionally, investors in the UK are thrilled by a Conservative win and the Tory party’s unexpected clear win was no exception. The FTSE 100 rose by 1.7 per cent even before the final seats had been declared whilst the pound rose by two cents against the dollar. The pound also rose against the euro, climbing rapidly by almost two euro cents.

Earlier opinion polls had indicated that no one party would win a clear majority, to the nervousness of the financial markets which had feared the possibility of a hung parliament, bringing with it a long period of uncertainty. Jason Hughes, from CMC Markets, a trading firm, said that the financial markets favour periods of stability and certainty and this win enables the Conservatives to continue to push through their policies of the previous parliament.

Bank shares initially saw the largest increase because the Conservative win lessens the likelihood of a rise in bank levies. Lloyds Banking group shares surged by 5.9 per cent and shares in Barclays by 4.1 per cent. Energy suppliers also saw their share prices rise because Labour had promised a freeze on energy prices and greater powers to the regulator, Ofgem. Shares in Centrica, owner of British Gas, were up by 7.9 per cent within hours of the news of the Conservative party victory.

However, according to analysts the rise in shares and the pound could be short lived. The possibility of Britain leaving the European Union will become a very real issue over the coming months and this will affect trading. Bill O’Neill of UBS Wealth International said that Britain’s possible exit of the EU and Scotland’s devolution will impact on the value of the pound sooner rather than later.