General Election 2010: Financial markets are left hanging

THE prospect of a hung parliament may be greeted positively by many voters, but financial markets today took the news less well.

The pound slumped to its lowest level against the dollar for more than a year, while the FTSE index of 100 leading shares was expected to fall around 110 points, or 2 per cent, in opening trading.

Sterling sank more than 2 per cent to below 1.46 against the dollar at one stage as investors weighed the prospect of potential delays in tackling the UK's dire public finances.

The pound also lost ground against the euro despite the Greek debt crisis.

June gilts – a form of UK Government bond – also fell more than 0.5 per cent off earlier highs, suggesting fewer investors are expecting a decisive government to start tackling the UK's massive deficit.

The markets had responded well to the early prospect of an outright Tory majority, but later fell back after a hung parliament began to look more likely.

According to analysts, that reflected the sentiment of investors hoping for a decisive Conservative win to get prompt action over the UK's record 164bn deficit.

Yesterday investors had to wrestle with the ongoing fallout arising from the Greek debt crisis, with markets around the world slipping over concerns about high levels of European government borrowing.

The fears helped drive the FTSE 100 Index down more than 1.5 per cent and New York's Dow Jones by more than 3 per cent

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