General Election 2019: Market surge sees FTSE 250 hit record high - but can it last?

The Conservative majority win at the general election has driven a rally in the pound and UK domestic stocks. Picture: AFP/Getty Images
The Conservative majority win at the general election has driven a rally in the pound and UK domestic stocks. Picture: AFP/Getty Images
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Stock markets reacted positively to the news that the Conservatives had won a clear majority in the general election with the FTSE 250 index racking up sharp gains.

The FTSE 250, which includes more UK-focused shares, leapt more than 4 per cent in morning trading in London, touching an all-time high.

The benchmark FTSE 100 index, which contains more international-focused companies that will be impacted by gains in sterling, made more modest gains, but was still up about 1.8 per cent by lunchtime.

The biggest risers on the FTSE 100 within moments of the stock market opening included Persimmon up 15 per cent, ITV up 12 per cent, Centrica up 12.6 per cent and Legal & General also up 12.6 per cent.

International-focused businesses, including GlaxoSmithKline, Diageo and Astrazeneca, were the biggest fallers due to the soaring value of the pound against the dollar, dropping 4 per cent, 3.5 per cent and 3 per cent respectively.

Russ Mould, investment director at AJ Bell, said: “The Conservative majority win at the general election has driven a rally in the pound and UK domestic stocks.

“It removes the threat of Labour trying to renationalise many sectors, explaining why shares in Royal Mail jumped 8 per cent.

“The fact that there also won’t be a hung parliament has given support to equities. The market now has more confidence that Johnson should be able to pass a Brexit deal and for the UK to formally leave the EU at the end of January 2020.

“All these factors helped the FTSE 250 to trade higher, triggering the starting gun for investors to start looking at UK equities again.”

Adam Vettese, an analyst at investment platform eToro, said: “This is the result that the markets had been crying out for as it alleviates some of the uncertainty that has been lingering for the past three-and-a-half years.”

Housebuilders

Housebuilders made solid gains with Barratt Developments up 10 per cent and Taylor Wimpey gaining 13 per cent.

Nick Burchett, co-fund manager at Cavendish Asset Management, said: “Less of the oven ready, and more of the shovel ready for housebuilders following the Tory victory.

“No sector has been weighed down more by Brexit uncertainty in recent times. Tax incentives, such as the 30 per cent discount for first-time buyers, is likely to get transactions moving imminently and demand for construction labour will also increase.

“Projects that have been put on the back burner since 2016 can now go full steam ahead.”

Brian Berry, chief executive of the Federation of Master Builders, said: “Building the homes and infrastructure that this country needs has to be a key priority to help drive the economy forward.

“The government needs to back the nation’s army of small builders, by delivering on the promised £3 billion National Skills Fund, investing in quality through a licensing scheme for the whole UK construction industry, and supporting local builders to retrofit the millions of homes that need to be upgraded to low carbon.”

Can it last?

Rupert Thompson, head of research at wealth management group Kingswood, said: "The big question now is whether this relief rally in UK assets has further to run.

"There is also considerable uncertainty over the scope of any trade deal with the EU. Trade deals generally take years rather than months to negotiate.

"Most likely, the UK and EU will only be able to agree a very limited trade deal by the end of next year, particularly given the Conservative desire for regulatory divergence from the EU. And, of course, it is far from clear how soon trade deals can be concluded with other countries.

"Any further gains in UK assets will be more down to cheap valuations rather than a radical transformation of economic prospects."