The blue-chip FTSE 100 index - which tends to be inversely correlated with the pound because of its mainly foreign-earning constituents - closed the day down nearly 2.5 percent, its biggest fall since the days after last June's European Union referendum.
Long-standing sterling bear Deutsche Bank called the election news a "game-changer" for the currency, saying it would revise up its forecasts.
With the Labour opposition weakened, May's gamble will probably pay off with an enhanced Conservative majority in Parliament - but it's unlikely to unite a country deeply split over the decision to quit the EU.
Sterling rose to a four-month high against the USA dollar after the market bet that May would strengthen her parliamentary majority, which Deutsche Bank said would be a "game-changer" for the pound.
The move means that, should Parliament agree, voters will go to the polls on June 8.
"She has a small majority, a big task ahead of her and a huge opinion poll lead", he said. Votes in France in April and May, and in Germany in September, have the potential to reshape the political landscape around the two years of Brexit talks with the European Union expected to start in earnest in June. Numerous multinationals that make up the index do business in foreign currencies and those earnings are worth less when the pound rises. Corbyn wins only 14 percent. May had repeatedly denied she would call a snap election before the next planned vote in 2020.
Prosecutors toss thousands of tainted drug cases
Be proactive - Use the "Flag as Inappropriate" link at the upper right corner of each comment to let us know of abusive posts. Earlier this month, Blodgett's office said less than 200 superior court level drug cases involving Dookhan were under review.
Polls have for months shown far-right leader Marine Le Pen and Macron qualifying this Sunday for the May 7 run-off, but it remains a contested, four-way vote with conservative Francois Fillon and far-left candidate Jean-Luc Melenchon.
Her spokesman said she had the backing of her top team of ministers and had informed Queen Elizabeth of her plans on Monday.
Although much of the reasoning has pointed towards the UK's impending exit from the EU, Mr Fabricant insisted the election should not be fought exclusively on Brexit battlegrounds.
But the law can be overruled if two-thirds of lawmakers in the British parliament vote in favour of early elections - something that Labour leader Jeremy Corbyn has previously indicated he would do.
She said: "Brexit presents many exciting opportunities".
Business groups largely welcomed the move, while expressing concern that the government's focus may stray away from the economy, which May said had defied "predictions of immediate financial and economic danger".
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