FTSE 100 Gains Most in Three Years as Election Bounce Continues

(Bloomberg) -- The U.K.’s FTSE 100 Index jumped the most since June 29, 2016 on Monday, as last week’s election result continued to soothe investors’ nerves over Britain’s exit from the European Union, while the prospect of a trade deal between the U.S. and China boosted commodity-exposed stocks.

The benchmark for U.K. blue-chip stocks rose as much as 2.7% and hit its highest level in more than four months, before trimming gains and closing the day up 2.3%. On Friday the FTSE 100 gained 1.1% as investors cheered the Conservative majority win by Prime Minister Boris Johnson, which gives the leader a stronger mandate to take Britain out of the European Union and thus remove a key pillar of uncertainty for markets. A relatively flat pound on Monday also helped the FTSE 100, which tends to have a negative correlation with sterling.

Shares in companies exposed to the U.K. economy led gains at the beginning of the week, with financial-services firm Hargreaves Lansdown Plc and lenders Barclays Plc and Lloyds Banking Group Plc all rising more than 4%.

UBS strategists said that the Dec. 12 election, Brexit and the completion of a final trade deal between the U.K. and the Europe have all been holding back U.K. stocks.

“The significant majority won by the Conservative party in the election moves capital markets on from that first risk and enables markets to focus into 2020 with a higher degree of certainty,” James Arnold, analyst at UBS, wrote in a note.

Brexit has been a major overhang on U.K. stocks, with the FTSE 100 still the worst-performing major European index this year, and the market featuring among the biggest underweight positions for global asset managers, according to Bank of America’s fund manager surveys.

To contact the reporter on this story: Kit Rees in London at krees1@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Beth Mellor, Blaise Robinson

©2019 Bloomberg L.P.