The Tories may have reassured the markets – but it won't last long

The markets want clarity – the Tory majority has given them that. But a cyclical recession could take it away

Related video: Boris Johnson promises to focus on the NHS and Brexit after winning majority (AP)

There is a knee-jerk reaction and a more measured one. From a British perspective, the election dominates everything. But from a global one, news that the US and China are on a path to an interim trade deal is, of course, more important. For the worlds of finance and business, both are thoroughly welcome. The markets want clarity – they now have it in spades.

Already sterling has responded to the election – continuing the rebound it began two weeks ago when the YouGov MRP poll predicted a Tory majority – nudging to $1.35. Equities have also responded, though it is hard to separate the impact of the UK election impact of the US-China trade deal. The FTSE 100 Index, which represents the largest companies on the London Stock Exchange, climbed by around 1 per cent in early trading, with gains chipped back by the rise in the pound. (Some 70 per cent of the earnings of companies in the FTSE come from outside the UK, either in revenues from foreign subsidiaries or from exports). The prospect of a boost to the UK economy – and there will be one – helps UK-based companies that depend heavily on the domestic market. So the more domestically-focused firms in the FTSE 250 Index shot up by some 5 per cent in early trading to an all-time high.

The big knee-jerk story from the markets is both predictable and welcome: clarity, clarity, clarity.