UK shares surge as Tories sweep to victory | Business| Economy and finance news from a German perspective | DW | 08.05.2015
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UK shares surge as Tories sweep to victory

Britain's stock market has rallied after early election results show PM David Cameron's Conservatives are set to govern the UK for another five years. Investors had largely backed the Tories over Labour.

The British pound soared to $1.5480 from $ 1.5262 late in New York on Thursday, after Prime Minister David Cameron appeared to win an unexpected election victory in Britain, overturning predictions that the vote would be the closest in decades.

In early trading Friday, the euro was down at 72.45 pence from 73.82 pence.

Also on Friday, the blue-chip FTSE 100 index of British stocks rose 1.6 percent to 6,995.25 points - edging closer to the record high of 7,122.74 points reached last month.

The FTSE 250 mid-cap index also hit an all-time high as the election results came through, setting the Conservatives on track for an overall majority in the face of many analysts' predictions of a hung parliament.

The FTSE 100 Volatility Index, which had risen on Thursday as uncertainty about the election result had increased, nosedived in the early minutes of trading before settling at its lowest level since early April.

Many investors had backed the Conservatives over the opposition Labour Party, which was campaigning on a platform that included tough new regulations on industries - such as banking, utilities, real estate and gambling.

Equities comeback

As the risks associated with a Labour victory was diminishing with the strong showing of the Tories, British bank Lloyds jumped by 6.6 percent, while the FTSE 350 Banking Index rose 2.9 percent to have its best day since July 2013.

Utility Centrica advanced 6.4 percent while betting company Ladbrokes surged 9 percent. Real estate company Foxtons rose around 10 percent, while online property search company Zoopla also advanced 4.7 percent.

"Leisure, real estate and banking shares will enjoy a strong run today, as will the utilities companies," Jawaid Afsar, sales trader with Securequity, told the news agency Reuters.

Vicky Redwood, chief UK economist at Capital Economics research group told the news agency AFP that the result would remove the risk of a "prolonged period of political uncertainty."

She expects the Conservatives victory will mean more austerity for Britain as PM David Cameron will seek to slash the budget further.

"Admittedly, a Tory victory means that the economy will have to endure a fairly aggressive renewal of the fiscal squeeze," Redwood told AFP.

Remaining risks

The FTSE 100 is up by nearly 7 percent since the start of 2015, buoyed by an economic recovery in Britain with record low unemployment and interest rates.

However, some important risks remain to the upswing in the UK economy.

In Scotland, the SNP nationalists won almost every seat, likely building momentum for Scottish independence by underscoring the political division with the rest of the United Kingdom.

Moreover, the Tory victory also means Britain is likely to face a historic in-out European Union referendum within two years.

UK business leaders have already warned of a British exit from the bloc, saying this will have negative consequences for economic growth.

uhe/el (Reuters, AFP, dpa)

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