Sterling recoups huge losses amid hopes of deal

STERLING and gilts recouped early massive losses yesterday, after initial jitters about the inconclusive outcome to Britain’s election eased on prospects of a deal between the Conservatives and Liberal Democrats.

Imminent talks between the two main centre-right and centre-left opposition parties boosted chances that politicians will be able to agree soon on deficit-cutting plans – vital for markets given a turbulent international backdrop that has sent shares tumbling.

The FTSE-100 index of top British shares closed at a six-month low of 5,123, down 2.6% on the day after a 3.9% fall by its European counterpart driven by worries about the risk of a Greek government bond default.