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The FTSE 100 opened higher on Friday as the shock prospect of a hung parliament saw the pound fall 2 per cent against the dollar.
The UK’s blue chip share index jumped 1.3 per cent to 7,544.78 minutes after opening.
Many of the companies on the index are internationally focused and so receive a profits boost when their overseas revenues are converted into the weakened pound.
The FTSE 250 index which includes smaller companies, many of whom have more of a UK focus, was down 0.35 per cent.
Markets had priced in a widely expected Tory majority but as the FTSE opened in London no party could secure enough seats to form a government on their own.
The FTSE 100 has in recent months tended to trade higher when the pound falls, but analysts said that significant uncertainty now would likely lead to investors turning cautious on any and all UK assets.
Tom Stevenson investment director for personal investing at Fidelity International said that the weak pound has provided a boost to the FTSE, “but that was against a backdrop of a more robust economy than anyone expected after the Brexit vote.
“Looking ahead, the FTSE 100 will struggle to progress even with the tailwind of weak sterling’s boost to exporters and overseas earners. Domestically-focused companies in the FTSE 250 and Small Cap indices also face headwinds as sluggish domestic earnings and rising inflation deliver an effective pay-cut to British workers. We continue to prefer European equities to the UK market.”
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Markets could be in for more turbulent times to come as the country prepares for the prospect of potentially going to the polls again, said Samuel Tombs of Pantheon Macroeconomics.
He added: “The economy’s resilience immediately after the Brexit vote last year suggests the link between political uncertainty and economic activity is not overwhelmingly strong.
“Still, the inconclusive election result will be an unhelpful influence at a time when quarter-on-quarter GDP growth already has dropped this year to 0.2 per cent, the slowest rate in the G7.”
Ms May had called the election with the aim of gaining a strengthened mandate, but instead will be left with no majority at all. Business voices called for stability on Friday morning – something which had been at the centre of the Prime Minister’s election campaign.
Dr Adam Marshall, the BCC’s director general said the “immediate priority” must be to form, “a workable administration that can give voters and businesses confidence around economic management”.
He added: “Whilst companies have for many months done their best to screen out political noise in order to focus on their own operations, this result will prove much harder for UK businesses to ignore. The swift formation of a functioning government is essential to business confidence and our wider economic prospects.”