The unexpected election victory for the Conservatives sent blue-chip stocks soaring more than 2.3 per cent as traders breathed a sigh of relief that the market will not be dogged by weeks of political uncertainty.
With banks and builders among the biggest risers, the FTSE 100 ended the day 159.87 points higher at 7,046.82 – the second-biggest gain of the year.
The FTSE 250, which is seen as a barometer of UK performance, rose to a new record of 17,935.93 after a number of stocks surged by as much as 10 per cent as David Cameron returned to Downing Street with a majority.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The elephant in the next room is the referendum on Europe, which would probably give the stock market the shivers. But if the vote for Scottish independence is anything to go by, the market won’t fret about that until its face is pressed up against the ballot booth.”
Defence contractor Babcock International enjoyed the strongest gain, soaring 93p or 9.4 per cent to 1,083p.
Scottish Gas parent company Centrica ended the day up 20.8p at 278.2p – an increase of 8.1 per cent – after Labour’s defeat ended the prospect of an energy price freeze and tighter regulation on the sector. Perth-based rival SSE was up 83p or 5.3 per cent at 1,647p.
Housebuilders also performed strongly on the back of the result and a report from Halifax showing house prices surged by 1.6 per cent in April. Persimmon jumped 93p, or 5.6 per cent, to 1,746p, while Barratt added 36.5p, or 7.1 per cent, to close at 549.5p.
State-backed lenders rose on hopes that the eventual sell-off of the taxpayer stake remains on course. Lloyds Banking Group gained 4.72p, or 5.8 per cent, to 86.85p and Royal Bank of Scotland added 20.3p, or 6.1 per cent, to end the day at 352.4p.