The rapid emergence of President Bush as the victor in the extraordinarily close election race helped to propel the FTSE 100 index of Britain’s leading shares to its highest close since June 2002.

After the Democratic challenger, Senator John Kerry, conceded in the final minutes of London trading yesterday, the FTSE closed up 25.3 points, or 0.5 per cent, at 4,718.5.

An enthusiastic welcome from Wall Street for a second Bush term, as investors anticipated a buoyant climate for equities, also sent US shares surging upwards.

By the close yesterday, the Dow Jones industrial average had jumped by 101.3 points points, to 10,137, while the broader-based S&P 500 index of America’s biggest companies and the tech-laden Nasdaq staged similar gains.

Shares also rallied in Europe, with eurozone blue-chip shares ending near six-month highs.

However, in ominous warning signs of the big economic challenges facing the re-elected President, the dollar sagged and US Treasuries tumbled in the aftermath of Senator Kerry’s concession.

The dollar gained ground in early dealing in London yesterday as relieved traders bet on a quick election result despite the disputed vote in Ohio, one of the key swing states.

However, hopes for a more decisive boost for the US currency from early confirmation of President Bush’s success quickly evaporated as the focus on currency markets switched back to worries over American economic prospects.

The dollar was already wilting in the build-up to polling on Tuesday as markets fretted over the persistence of a “soft patch” in America’s recovery.

By last night the dollar was back on the slide amid nagging anxieties over the longer-term toll from the vast US current account deficit, as well as speculation that the new administration might attempt to pursue a weak dollar strategy.

Paul Ashworth, of Capital Economics, said: “Now that political uncertainty has been removed, the focus will return to the much bigger economic issues.”

In bond markets, US Treasuries also fell sharply as their role as a haven from election uncertainty disappeared. The benchmark US ten-year Treasury note fell by $0.625, pushing its yield up to 4.13 per cent, from 4.06 per cent late on Tuesday.

Despite the potent rally in shares on Wall Street yesterday, economists sounded warnings that the gains in markets could prove short-lived.

David Rosenberg, of Merrill Lynch in New York, said that investors’ attention could soon return to concern over an expected slowdown in the US recovery into 2005. “While many investors will treat the election results enthusiastically, it may not be a winning strategy to extrapolate the current rebound into the future,” he said.

POLITICS AND WALL STREET

How Dow Jones moved on the next trading day after US presidential elections since 1980

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive