Election 2015: FTSE 100 makes gains on opening as Cameron looks set to stay as PM

Pound made biggest one-day gain against euro for two years

Prime Minister David Cameron and wife Samantha arrive at his Tory headquarters in central London after the General Election put his Conservative Party on the brink of securing an absolute majority in the House of Commons (Steve Parsons/PA Wire )

An end to the volatility of the last few weeks was in sight this morning as it emerged that David Cameron would likely be staying on at number 10. The City of London, delighted with the prospect of stability after recent uncertainty, wasted no time expressing its approval.

The pound surged, making its biggest one-day gain against the euro for two years.

The FTSE 100 of the 100 biggest UK registered companies climbed 1.2 per cent to 7000 after markets opened at 8am, in a vote of confidence for the continued austerity policies of the Conservative government.

Housebuilding stocks were up 6 per cent, while estate agents made huge gains. Foxtons saw a rally of 10 per cent.

Banking stocks in HSBC, Barclays and Standard Chartered were up as Banks expressed some relief that tougher Labour policies would probably not come to pass

Stocks in energy companies rallied. British Gas owner Centrica saw stocks up 8.6 per cent.

The pound surged, making its biggest one-day gain against the euro for two years.

Here's what market commentators have made of the result and the reaction they are expecting on markets today:

Michael Hewson, chief market analyst at CMC Markets

UK markets look set to surge on the open as early results appear to show that the opinion polls were way off, with the Conservative party set to come up just shy of a majority, confounding expectations.

While the final results aren’t yet in it is slowly becoming apparent that the Labour Party and Liberal Democrats have come up well short of their expectations.

Given the contents of the Labour Party manifesto this early equity market and sterling surge is likely to be more relief that none of these measures will now come to pass.

The FTSE 100 is expected to open 98 points higher at 6,985

Bill O’Neill, head of the UK Investment Office at UBS Wealth Management

This result is far less complicated than the markets’ worst fears. But we are still dealing with a government with a miniscule working majority at best.

Once people acclimatise to the certain outcome eyes will immediately turn to the challenges lying ahead. Brexit (Britain leaving the EU) and Scoxit (Scottish Independence) will now become chief concerns.

Markets will respond swiftly today and in the coming days. With certainty will come a renewed confidence from investors in a more stable and transparent policy climate. For now, let’s enjoy the relief rally.

A renewed commitment to austerity should support gilts.

Sterling will, in our view, be moved by a number of different factors in the coming days and weeks.

It could hold the initial gains following the astounding exit polls last night but the Brexit and Scottish devolution debates might influence the path of the pound quicker than we think.

The good news is that the current fiscal trajectory remains firmly in place. Importantly, the Bank of England will not be confronted by a change in the fiscal framework. This could prompt lower for longer interest rates.

Chris Beauchamp, Senior Market Analyst, IG

When the exit poll was released last night we saw a spike higher in the pound and FTSE futures as well, with the former moving back to $1.54 and the latter pushing higher from last night’s close.

As David Cameron is set to retain the keys to No. 10, with an increased number of Conservative MPs, the way ahead in economic policy terms looks very much like ‘steady as she goes’, especially since they look likely to govern alone.

For investors, the results from last night 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.

We have yet to see any realisation among traders that the Conservatives’ victory makes an EU referendum almost certain.

A majority Tory government would allow the vote to proceed, which will likely lead to market jitters, both in FX and in key FTSE sectors such as banks and major financial firms, who have already warned about the impact of a popular vote on the UK economy.

However, this appears to be a question for another time. With US job numbers on the calendar for today, it may be that the UK election result disappears from the radar screen much sooner than expected.

Tony Cross, Market Analyst, Trustnet Direct

There are still a number of marginal seats to report and in the event that these don’t go to the Conservative party then by the time the market opens we could be looking at a very different picture, but as it stands right now, the financial community appears confident that we won’t have a protracted period of uncertainty.

This could pave the way for some aggressive buying of equities shortly after the open although assuming there’s no legislative quagmire to wade through then US non-farm payrolls will fast become the next point of focus for the City.