LONDON MARKETS: FTSE 100, Pound Leap With Conservatives On Track For Election Win

By Carla Mozee, MarketWatch

U.K. stocks rallied Friday, and the pound surged, with financial markets cheering indications the Conservative Party is on course to take power in the U.K. parliament.

The U.K.'s FTSE 100 jumped 138 points, or 2%, to 7,026.34. Royal Dutch Shell had the only listing to go lower, with A-class shares down 0.9%.

Sector-wise, utilities climbed more than 4%, and financials were up 3%, as were industrials.

Shares in bank major Lloyds Banking Group PLC topped the FTSE 100, with a gain of 7.3%. Utility Centrica PLC rose 6.8%, while engineering support services company Babcock International Group PLC added 6.6%.

Meanwhile, the mid-cap FTSE 250 gained 2.5% to 17,887.14. 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.

On the 250 index, bookmaker Ladbrokes PLC shot up 9%, home builder Berkeley Group Holdings PLC was up 9% and real-estate agency Savills PLC rose 8%.

The majority of election results in Thursday's 650-seat contest are in, and the BBC has projected the Conservatives could win 350 seats. That would give Prime Minister David Cameron an effective, but razor-thin, majority in parliament.

The pound (GBPUSD) rallied to $1.5459 from $1.5247 late Wednesday. Overnight, sterling hit as high as $1.5523, after a BBC exit poll put the Conservatives in the lead by a surprisingly large margin. That went against opinion polls that for weeks suggested the election result would leave Conservatives and Labour neck and neck, with a coalition the likely outcome.

"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.

On the fixed-income market, bond prices rose, pushing the yield on the 10-year U.K. Gilt down 14 basis points at 1.92%.

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