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

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).

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