By Geoffrey Smith
Investing.com -- Homebuilders, banks and utilities led the charge higher on Friday as U.K. stocks soared in the wake of an emphatic election victory for the Conservative Party.
The scale of the victory banished the threat of a radical left-wing Labour Party setting the agenda for the foreseeable future, removing a huge question mark over the future of the country’s banks and its privatized utilities in water and energy, as well as train operators.
By 5:20 AM ET (1020 GMT), four of the biggest gainers in the FTSE 100 were homebuilders. Taylor Wimpey (LON:TW) rose 14.9%, while Barratt Developments (LON:BDEV) rose 12.0%, Persimmon (LON:PSN) was up 11.1% and Berkeley was up 12%. Midcap builders Bellway and Redrow were also both around 10% higher.
Among the financials, Royal Bank of Scotland (LON:RBS) – the bank most exposed to possible interference from a Labour government due to the large residual government stake in the bank – was the biggest winner, rising 11.8%. Lloyds Banking Group (LON:LLOY) rose 7.5% and Barclays (LON:BARC) rose 8.2%, with the exclusively-U.K. focused midcap CYBG (LON:VMUK) also rising 18%.
U.K.-based asset managers also profited from the perception that the greater certainty on the political front will give retail investors confidence to re-enter a stock market that has been largely moribund since the 2016 Brexit referendum.
As such, retail investment platforms Hargreaves Lansdown (LON:HRGV) and AJ Bell (LON:AJBA) rose 9.3% and 5.8%, while Jupiter Fund Management (LON:JUP) rose 5.4% and St. James’s Place (LON:SJP) rose 6.3%.
Among utilities, water company Severn Trent (LON:SVT) surged 7.8%, while power and gas network operator National Grid (LON:NG) rose 6.5%. Energy suppliers Centrica (LON:CNA) and SSE (LON:SSE) rose 6.6% and 8.3% respectively.
Labour had threatened to take back into public ownership many of the services that had been privatized by Margaret Thatcher and her successor John Major between 1980 and 1997.
U.K.-focused retail and consumer stocks were also sharply higher, anticipating a bounce to consumer confidence that may well follow the end of a turbulent period of political uncertainty. Marks and Spencer (LON:MKS) was up 7.4%, Primark owner Associated British Foods (LON:ABF) was up 5.9% and restaurant chain Greggs PLC (LON:GRG) was up 4.3%.
Among other things, Johnson has promised big increases in public spending that should trickle down into higher consumer expenditures. If that proves true, then expectations of any further interest rate cuts from the Bank of England will also fade, further supporting bank stocks.