By Steve Goldstein, MarketWatch
Home builders and banks in the U.K. rallied on Friday in relief at a commanding Conservative victory in the general election.
Equity strategists at Citi said the U.K. election result “is probably as good as it gets.” While Conservatives had led in polls since the election was called, it wasn’t clear beforehand that they would win a majority in Parliament. Read more about the election.
The FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.09% climbed 3.4% to 21507.50. Investment managers, real estate investment trusts and home builders led the way as investors flocked to stocks more exposed to the domestic economy. Double-digit gainers included lender Virgin Money UK /zigman2/quotes/207233909/delayed UK:VMUK +3.12% , bus operator Stagecoach Group /zigman2/quotes/206082799/delayed UK:SGC +1.43% and real-estate agent Savills /zigman2/quotes/202124149/delayed UK:SVS +0.46% .
Goldman Sachs strategists reiterated a call on Friday to go long U.K. domestic stocks, particularly homebuilders and domestic banks. “Clarity on the UK’s terms of exit from the EU should unlock pent-up business investment; the reversal of a decade of fiscal consolidation should provide a fillip to domestic demand; and a pick-up in global growth should underpin a recovery in net exports,” said analysts Zach Pandl, Sharon Bell and George Cole.
The large-cap FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.03% also gained ground, rallying 1.5% to 7382.19.
The surge in the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0506% was a drag from companies that generate most of their revenue outside the U.K., such as pharmaceutical GlaxoSmithKline /zigman2/quotes/200381158/delayed UK:GSK -0.77% and beverage maker Diageo /zigman2/quotes/205611832/delayed UK:DGE -1.19% . However, news that the U.S. and China are on the verge of signing a trade agreement boosted stocks worldwide.
Large-cap advancers included home builders Persimmon /zigman2/quotes/206444744/delayed UK:PSN +3.96% , Taylor Wimpey /zigman2/quotes/208623755/delayed UK:TW +2.17% , Berkeley Group /zigman2/quotes/202576163/delayed UK:BKG +1.88% and Barratt Developments /zigman2/quotes/209812640/delayed UK:BDEV +1.99% . U.K. banks Royal Bank of Scotland and Lloyds Banking Group /zigman2/quotes/202285510/delayed UK:LLOY +3.24% also surged.