London close: UK stocks unleashed after election
London’s domestically-focused FTSE 250 stole the limelight on Friday, hitting an all-time high as sterling surged after Boris Johnson’s Conservative Party secured a large parliamentary majority, with reports of a Sino-US trade deal also buoying the mood.
The small-cap index was up 3.44% at 21,507.79, while the FTSE 100 was 1.1% firmer at 7,353.44.
The stellar gains for mid cap stocks, which are more exposed to the UK economy, came as sterling rose 1.29% against the US dollar to 1.3338, having briefly hit $1.35 - its best level since May 2018 - after the exit polls. Against the euro, the pound was 1.41% higher at 1.1995, trading at levels not seen since after the EU referendum.
David Cheetham, chief market analyst at XTB, said: "Investors have breathed a huge sigh of relief at the decisive outcome, due to both the clarity that it brings on Brexit (at least in the near term) as well as the avoidance of a left-wing Labour government."
However, he also cautioned that "this is still far from an ideal backdrop for UK, rather the best scenario out of bad bunch".
"With Boris Johnson’s promise to take the UK out of the EU by the end of next year we could well end up with what is effectively a no-deal Brexit. However, the size of the Conservative majority plays into the hands of a softer Brexit now, as the PM will not have to pander to the more Eurosceptic wings of the party and not be reliant on universal support from Tory MPs to pass Brexit-related legislation."
Election aside, sentiment was underpinned by news that US President Donald Trump and Chinese officials had signed off on a 'phase one' trade deal with China. This means that the White House will not go ahead with the $156bn tariffs it had planned to slap on Chinese goods on Sunday. It will also cut some of its existing tariffs on Chinese exports.
In equity markets, stocks with UK exposure were the standout gainers, with housebuilders such as Taylor Wimpey, Berkeley Group and Persimmon all higher. Banks also advanced, with RBS, Lloyds, Barclays and Virgin Money in the green.
Utilities SSE, United Utilities and Centrica shot up as the threat of nationalisation under a Labour government was removed.
On the downside, exporters such as GlaxoSmithKline and Diageo fell.
Rentokil Initial suffered heavy losses in the first half of the session but by the close had managed to recoup a large part of its losses. Jefferies pointed out that with more than 40% of its revenues coming from the US, it is highly exposed to the GBPUSD rate.
Russ Mould, investment director at AJ Bell, highlighted three sectors in particular that would benefit from the post-election surge in sterling: general retailers, food retailers and travel and leisure. This helps to explain why International Consolidated Airlines, Next, TUI, Dixons Carphone and AB Foods were all prominent risers in early trade, he said.
"This is because a strong pound may cap imported raw material costs for them and also tamp down inflation more generally, putting more money in consumers’ pockets on a real-term, post-inflation basis.
"In addition, a perky pound means it is cheaper to travel abroad than would have otherwise been the case, something which could benefit tour operators and travel agents.
"This is not to say that all of the challenges which face these sectors or their constituents will immediately melt away."
FTSE 100 - Risers
Taylor Wimpey (TW.) 199.65p 14.68%
Barratt Developments (BDEV) 765.00p 14.01%
Berkeley Group Holdings (The) (BKG) 5,142.00p 13.99%
International Consolidated Airlines Group SA (CDI) (IAG) 629.40p 13.08%
Persimmon (PSN) 2,816.00p 12.01%
Severn Trent (SVT) 2,420.00p 8.96%
Centrica (CNA) 87.80p 8.80%
Royal Bank of Scotland Group (RBS) 251.80p 8.39%
SSE (SSE) 1,415.50p 8.09%
Land Securities Group (LAND) 996.60p 7.46%
FTSE 100 - Fallers
Polymetal International (POLY) 1,165.00p -3.24%
Fresnillo (FRES) 572.40p -3.05%
Rolls-Royce Holdings (RR.) 686.40p -2.56%
NMC Health (NMC) 2,464.00p -2.53%
Hikma Pharmaceuticals (HIK) 1,890.50p -1.95%
Rentokil Initial (RTO) 426.50p -1.93%
Standard Chartered (STAN) 704.80p -1.84%
Royal Dutch Shell 'A' (RDSA) 2,152.50p -1.49%
BP (BP.) 462.45p -1.47%
Royal Dutch Shell 'B' (RDSB) 2,135.50p -1.41%
FTSE 250 - Risers
Virgin Money UK (VMUK) 216.60p 18.68%
Stagecoach Group (SGC) 154.20p 16.64%
Savills (SVS) 1,147.00p 13.50%
Bellway (BWY) 3,831.00p 11.79%
Tullow Oil (TLW) 67.80p 11.77%
Kainos Group (KNOS) 694.00p 11.61%
Telecom Plus (TEP) 1,486.00p 11.39%
OneSavings Bank (OSB) 445.00p 10.70%
Trainline (TRN) 493.00p 10.54%
Hill & Smith Holdings (HILS) 1,487.00p 10.15%
FTSE 250 - Fallers
Aston Martin Lagonda Global Holdings (AML) 556.80p -9.49%
Future (FUTR) 1,362.00p -3.68%
Hochschild Mining (HOC) 156.30p -2.31%
Centamin (DI) (CEY) 119.70p -1.76%
Senior (SNR) 182.70p -1.62%
Baillie Gifford Japan Trust (BGFD) 819.00p -1.33%
Sophos Group (SOPH) 551.00p -1.18%
Pets at Home Group (PETS) 280.00p -1.06%
Petrofac Ltd. (PFC) 393.30p -1.06%
JPMorgan American Inv Trust (JAM) 468.00p -0.85%