Sterling may have come under pressure but the equity markets showed no sign of the jitters yesterday as the markets awaited the general election result. Despite weak economic data, the FTSE 100 index closed 46.8 points ahead at 5,948.3.

That compared with Footsie's close of 4,445 at the time of the last election on May 1st, 1997, a rise of 34 per cent over the period of the Labour government. According to Mr Ian Stewart of Merrill Lynch, the market is expecting Labour to be returned with a 150-seat majority, compared with 179 last time.

Figures on manufacturing output and industrial production were much weaker than expected, with the former falling 0.9 per cent on the month in April and the latter 0.1 per cent. However, the Bank of England's monetary policy committee, which decided to leave rates on hold on Wednesday, has to balance manufacturing weakness against the continued strength of consumer demand.

One problem for the manufacturing sector has been the strong pound. But sterling weakened yet again yesterday as investors anticipated that the Labour government would use an election victory to push for entry into the single currency. The markets assume that the UK would want the pound to enter the euro at a considerably lower rate than current levels.

A weaker pound is, however, a slightly double-edged sword for the manufacturing sector. Most companies would be quite happy to see the pound fall against the euro, since Europe is Britain's biggest export market. But the pound's decline to a 15-year low against the dollar raises the cost of raw materials, most of which are priced in the US currency.

Once the election is out of the way, the markets will be alert for any government hints on the subject of the euro.

The FTSE 100 was helped by a rebound in Vodafone and Railtrack and some strength in the banks.

The main news at the corporate level was the profits warning from Hays, the business services group, which saw its shares plunge 31 per cent.