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Election 2015: how will the markets react after polling day?

What the outcome of the election could mean for the pound, bonds and equities when markets re-open

Britain's financial markets are braced for uncertainty, as polling opens in the most unpredictable general election in a generation. 

With a hung parliament thought to be the most likely outcome, experts predict that a short period of political gridlock could actually prove beneficial to trading. 

"In other words, if Britain wakes up to no strong majority for any party, there will be no big policy changes to fear," says The Guardian

The pound 

A Tory-led government would put the pound under immediate pressure, and as a referendum would not be scheduled immediately, it could lead to a drawn-out period of weakness, experts predict. Meanwhile, the prospect of a slower deficit reduction under Labour could undermine confidence in the economy, and subsequently in sterling. The impact on the pound will depend on how long the political wrangling continues. The longer the negotiations stretch out, the more the pound is expected to weaken. 

Government bonds 

With little variation in fiscal policy between the larger parties, gilts aren't likely to be "overly spooked" by even a Labour government reliant on the Scottish Nationalists, says the Financial Times. Instead, factors such as the ongoing shift in global bond market sentiment and the actions of the Bank of England are likely to have more impact.

Equities 

With Ed Miliband promising to freeze energy prices and rail fares, as well as reforming the banking industry and raising taxes on expensive property, shares in those sectors are expected to come under pressure in the event of a Labour-led coalition. But City-based companies on the FTSE 100 will also be worried about the possibility of a "Brexit" in the event of a Tory-led government. 

Despite the mounting uncertainty, financial markets have so far remained largely unaffected by the election, says the Daily Telegraph. Unlike the panic that gripped trading floors ahead of last year's Scottish referendum, a combination of monetary stimulus from Europe and encouraging signs of economic growth appear to have "tranquilised" British markets this time round. However, all of that could quickly change after polling closes at 10pm tonight and results begin to come through. 

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