U.K. voters have backed the Conservative Party, which under Prime Minister Boris Johnson's leadership has regained majority in the Parliament and will lead the U.K. to leave the European Union on Jan. 31.
In a snap election Thursday, Mr. Johnson's party defeated Jeremy Corbyn's Labour Party 364-203.
Mr. Johnson called for a general election on Oct. 24, following failed negotiations among members of Parliament over a new withdrawal agreement.
While Mr. Johnson's Brexit bill was approved by U.K. MPs, they rejected the timetable of exiting the European Union on Jan. 31. The U.K.'s original exit date, March 31, was extended three times by the European Council since after the U.K inconclusively debated terms of a withdrawal agreement.
The earlier March 31 date was set when former PM Theresa May triggered a legislation starting an EU departure process, known as Article 50. Ms. May's original withdrawal deal was subsequently rejected.
Following Thursday's outcome, the pound sterling fell 0.49% against the dollar Friday morning to $1.338, while the FTSE All-Share index rose 2.07%.
Money managers welcomed the renewed clarity on Brexit policy, which they said in the short term will be positive for pound sterling and U.K. equities.
"The most significant implication of the large Conservative majority is a much more business-friendly outcome ... reflected in a strong rally in U.K. midcap and domestically focused equities," said Tristan Hanson, multiasset fund manager at M&G Investments, in an email.
Charles Hepworth, investment director for asset allocation at GAM Investments, agreed, adding in an email: "Sterling is rampaging higher by 2% and while it is unlikely to be as good for FTSE 100 large caps it should be good for mid- and small-caps."
GAM's Niall Gallagher, investment director for European equities said: "The U.K. election result is very positive for European equities and within that stocks exposed to the U.K. economy and European cyclicals such as automotive, construction, and building materials."
Following the Conservative victory Thursday, U.S. President Donald Trump teased a new trade agreement between the U.S. and the U.K. in a tweet.
Louise Dudley, global equities portfolio manager at Hermes Investment Management, said: "European markets rallied overnight following Trump's tweet about a "BIG DEAL" and the confirmation of Conservative majority."
But for credit investors the news could be less favorable. "Sterling investment-grade credit spreads are likely to compress a little further, in our view," noted Sonja Laud, CIO at Legal and General Investment Management.
However, some managers warned that the negotiation of a new trade deal with the EU can still spark more uncertainty over the course of the year, renewing volatility in U.K. currency and U.K. assets, ahead of a new deadline at the end of 2020. Seema Shah, chief strategist at Principal Global Investors, also noted another risk. "(Mr. Johnson's) very strong majority, however, also raises risks that he could look to renegotiate the current withdrawal deal as now he doesn't need to rely on the support of any other parties," she said.
Still, Shamik Dhar, chief economist at BNY Mellon Investment Management said: "In the short term, there will be some damage to the economy as a result of Brexit; however, whether the damage is long-lasting remains to be seen. I am skeptical about the longer term negative impact of Brexit and believe that many of the more negative estimates depend on Brexit being a substantial hit to productivity growth."
