By Carla Mozee, MarketWatch
Pound taps $1.55
A rally in U.K. stocks and the British pound was under way
Friday, with financial markets cheering indications the
Conservative Party is on course to remain in power in the U.K.
parliament.
The U.K.'s FTSE 100 jumped 123 points, or 1.8%, to 7,010.07,
with all constituents on the blue-chip index, at one point, higher
in late-morning. As well, all sectors advanced, led by a more than
4% rise in utilities and gains for financials surpassing 2%.
The midcap FTSE 250 gained 1.7% to 17,947.34. It touched an
intraday high of 18,161.18, surpassing the index's all-time closing
high of 17,875.11 notched on April 10.
The majority of election results in Thursday's 650-seat contest
are in, and the BBC has projected the Conservatives could win 329
seats. That would give Prime Minister David Cameron an effective,
but razor-thin, majority in parliament. Opinion polls for months
suggested the election result would leave Conservatives and the
Labour Party neck-and-neck.
"For the best part of 12 months ... transports, utilities,
banking and house builders have been weighed down by concerns that
the Labour Party's manifesto promises would kill investment
incentives as well as threaten dividends for the companies in
question," said Michael Hewson, chief market analyst, at CMC
Markets UK, in a note Friday.
The "realization that none of these measures will come to pass
has seen the market rebound like a coiled spring," he said.
Shares in Centrica PLC , the parent company of British Gas, rose
8%, topping the FTSE 100. Bank major Lloyds Banking Group PLC (LYG)
gained 6.1%. Babcock International Group PLC , an engineering
support services company, added 7.8%, and home builder Barratt
Developments PLC added 5.5%.
On the 250 index, home builder Berkeley Group Holdings PLC was
up 10%, bookmaker Ladbrokes PLC shot up 9.7%, as did real-estate
agency Countrywide PLC .
On the fixed-income market, bond prices rose, pushing the yield
on the 10-year U.K. Gilt down 8 basis points at 1.86%, according to
electronic trading platform Tradeweb.
Sterling: The pound (GBPUSD) climbed to $1.5440 from $1.5249
ahead of Thursday's election. Overnight, sterling hit as high as
$1.5523, after a BBC exit poll put the Conservatives in the lead by
a surprisingly large margin.
"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," among the Group of Seven
advanced economies, said Craig Erlam, senior market analyst at
Oanda, in a note early Friday.
While sterling "has enjoyed a round of unexpected bullish
momentum," the gains are at risk of fading, wrote Jameel Ahmad,
chief market analyst at FXTM. A downward move "will be due to an
admission from investors that it is only going to be a matter of
time before attention shifts and questions over a possible
'Brexit', or increased potential for another Scottish referendum
need to be answered."
The Conservatives have promised to hold an in-or-out referendum
on a U.K. exit from the European Union -- or "Brexit" -- by 2017.
Meanwhile, the Scottish National Party spearheaded last year's vote
on whether Scotland should break away from the U.K. The SNP after
Thursday's U.K. general election is headed for a landslide victory
(http://www.marketwatch.com/story/scottish-national-party-set-for-landslide-in-uk-election-2015-05-07).
Also likely to be watched closely by investors is the U.S.
nonfarm-payrolls report, scheduled for release at 1:30 p.m. London
time. After just a 126,000 rise for payrolls in March, anything
less than 200,000 gain may be seen as another letdown.
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