After Britain went to the polls on December 12th, electing the Conservatives into office for another five years with a majority of over 60 seats, markets and stocks across the United Kingdom saw significant shifts and changes as the world reacted to the re-election of current PM Boris Johnson.
Sterling Gains
Sterling made a sharp jump upwards after the exit poll results were announced last night and rose over $1.35 at one point as the results were coming in, a figure that has not been seen since the summer of 2018.
The pound, which has been struggling over months of economic uncertainty, also saw an increase against the Euro, reaching its highest levels in almost three and a half years.
Mr Johnson has pledged to take the United Kingdom out of the European Union by January and its hoped that it will end years of uncertainty about how and when Brexit will commence.
FTSE
The FTSE 100 index rose by around 1.1% as results were officially declared and some UK specific shares, known as the FTSE 250, saw record highs thanks to the election results.
In shares that are closely tied to the British political arena, prices appeared to rise steadily through the day.
Industries that a Labour government had pledged to nationalise, including water and building and construction, saw steady increases in share prices. Severn Trent, the water provider, saw their share price increase a healthy 9% during trading.
Companies within the rail and energy industries, the former of whom had been the target of Labour’s nationalisation plans to combat high ticket prices, saw steady increases in trading prices throughout the day.
Brexit Risks Dampen Initial Reaction
Whilst many have celebrated the buoyancy of the market in response to Mr Johnson’s election, analysts have warned investors not to get too comfortable with the positivity.
Brexit negotiations have been less than smooth so far and public opinion could change over the coming months.
Moreover, this is just the beginning of negotiations for the exit and a trade deal still needs to be discussed and approved by governments in both the UK and the EU. If the sailing is rocky, the economy and the markets could be hit badly.
Sterling in particular has already given up the post-election gains, as the risk of a no-deal Brexit has increased after PM Johnson set the December 2020 trade deal date in stone.