THE TELEGRAPH: The pound plunged up to 4½ cents against the dollar during a roller coaster 24 hours of trading as the prospect of coalition Government prompted investors to ditch UK assets.
The inconclusive election result unnerved investors already spooked by Greece's deepening debt crisis and a global rout of equity markets.
Gilt yields see-sawed, with investors at one point demanding an extra 1.25 percentage points to hold 10 year gilts rather than German Bunds – the biggest spread since 1998. Shares also fell, with the benchmark FTSE 100 dropping 2.6pc, capping its worst week for 14 months.
Michael Saunders, chief European economist at Citigroup, said Britons should brace for a potential "meltdown" if there is no deal for stable government by Monday.
"Right now there is a firestorm of a sovereign credit crisis sweeping global markets," he said. "If markets do not get some sense on Monday that there is a solid government with a credible route back to fiscal stability, things could get very ugly indeed. A coalition of Labour, Lib Dems and nationalist parties could well precipitate a market meltdown."
The best outcome so far as investors were concerned would be a Conservative-Liberal Democrat coalition with an outline plan to cut the deficit, he said. >>> Richard Fletcher and Edmund Conway | Friday, May 07, 2010
