The shares of companies most exposed to the UK economy rallied strongly in the wake of the election result, which returned Boris Johnson with a majority of more than 50 seats.

Sterling rose 1.84 per cent against the dollar, reaching $1.34, while it hit a 39-month high against the euro, rising 1.43 per cent to €1.19.

Ben Yearsley, director at consultancy firm Fairview Investments, said: “As has been repeated many times, the UK is cheap and unloved. Brexit uncertainty and political chaos has meant no one wanted to invest, even at massively depressed prices.

“Now there is more certainty and a stable five-year government, I expect overseas investors to return and start looking at the fundamentals again.

“Domestic stocks should bounce the strongest as there has been a disconnect between perceived domestic stocks and overseas ones.”

The FTSE 250 index was up 4 per cent since it opened. The companies in this index derive about half of their earnings from within the UK, so are sensitive to the performance of the UK economy.

Richard Buxton, manager of the £1.7bn Merian UK Alpha fund, which has significant exposure to UK domestic stocks and which recently attracted its first monthly net inflow of capital since the Brexit vote said: “I expect to see business confidence respond positively to this new set of political realities, which in turn should be genuinely positive for the UK economy.

“The next Budget, which is expected to be announced in February, is likely to be loose in terms of fiscal spending, and therefore stimulatory in economic terms.

“I expect consumer confidence – remarkably resilient in recent years notwithstanding all the uncertainty – to strengthen significantly.

“Sterling’s new-found resilience should help suppress UK inflation, and therefore boost real-terms wage growth over the year ahead, further bolstering consumers.”

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