UK market leads European equity rally after Conservatives' election win

LONDON (Reuters) - UK shares led a rebound in European equity indexes on Friday after early poll results showed Prime Minister David Cameron's Conservatives were set to govern Britain for another five years.

Broader market sentiment was also supported by a return to calm in U.S and European government bonds after a recent selloff, with investors awaiting U.S. jobs data due later in the session.

At 0858 GMT, the FTSEurofirst 300 index <.fteu3> of pan-European shares was up 1.6 percent at 1,572.07 points, with Britain's FTSE 100 <.ftse> up by the same amount.

Bank Lloyds rose 6.3 percent as the threat of a Labour-proposed banking levy disappeared while utility Centrica , which might have been hit by a tariff freeze under a Labour government, added 6.9 percent. British defense group Babcock gained 7.1 percent.

With more than 95 percent of seats declared, the Conservatives had won 310 of 650 seats and looked on track to win a majority in the lower house of parliament. [.L]

"As far as markets are concerned it is good news," Stanhope Capital’s chief investment officer Jonathan Bell said.

"A conservative victory is preferable over a Labour-SNP coalition and that’s why we see sterling and UK equities higher and the sectors that were under threat from a Labour policy, such as financials and utility (shares), are going to do well."

The FTSEurofirst 300 index had fallen 6 percent from a 14-1/2 year peak hit in April as a rebound in oil prices raised prospects of an early interest rate hike in the United States at a time of patchy economic growth.

Euro zone government bonds had sold off sharply while the euro had rebounded against the dollar, dulling the euro zone's export prospects.

"There will be a bit of a relief rally (after the UK election) and then people will go back to focus on the global economy," Paul Sedgwick, head of investment at money manager Frank Investments.

"...If bonds stabilize I think equity markets will do well."

Investors were keeping a close eye on U.S. employment data due at 1230 GMT for a fresh indication of the state of the world's largest economy.

Among individual movers, agrochemicals firm Syngenta rose 15 percent after it rejected a $45 billion takeover offer from Monsanto , saying the offer was too low and did not fully take into account regulatory risks.

Nokia rose 3.4 percent after taxi service Uber submitted a $3 billion bid for the Finnish firm's map business HERE, the New York Times reported, citing people with knowledge of the offer.

(editing by John Stonestreet)