The FTSE 100 has soared after the Conservatives’ election victory and a phase one US-China trade deal helped ease long term uncertainties that have consistently weighed on markets.
UK stocks rallied again today after making substantial gains on Friday, with the benchmark FTSE 100 rising as much as 2.57 per cent by mid-afternoon to 7,542.46 – the biggest gain since April 2018.
The blue-chip index is now on course for its best day since 29 June 2016 – shortly after the EU referendum.
The smaller FTSE 250 index rose as much as 1.91 per cent on Monday to a new record high of 21,918.71.
The index had already soared 3.4 per cent at the end of last week, boosted by its domestically-focused companies following the election result.
“The FTSE is flying,” said Markets.com analyst Neil Wilson. “It’s still the relief playing out.”
“It’s absolutely on the mark with what we had expected; there has been a lot of pent-up demand,” Wilson continued. “Uncertainty over Brexit has gone and the Corbyn danger has evaporated.”
Markets were further boosted by comments from the US trade representative yesterday that US exports to China would nearly double thanks to the phase one agrement, which he Robert Lighthizer described as “totally done”.
“Choosing to ignore the more eyebrow-raising elements of the US-China ‘phase one’ trade agreement – a healthy dose of scepticism has greeted the deal – the markets donned their Santa hats and celebrated their early Christmas present,” said Spreadex’s Connor Campbell.
Sterling largely held on to last week’s gains despite receiving a knock from weaker than expected UK PMI data for December, and was largely flat against the dollar and the euro.
This helped boost the blue-chip FTSE 100, which contains many internationally-exposed stocks.
Hargreaves Lansdown and British American Tobacco were leading the index’s risers by late afternoon, racking up gains of 7.17 per cent and 4.95 per cent respectively.
Banks and other investment firms made up many of the other major climbers.
The US’s S&P 500 and Nasdaq indices both hit record highs on Monday, boosted by the calming of US-China trade tensions.
The S&P 500 opened 0.47 per cent higher, while the Nasdaq Composite gained 0.65 per cent at the opening bell in New York.
The former was sitting 0.83 per cent up by late afternoon UK time, while the latter had gained 1.05 per cent.
“The prospects for the UK have improved significantly but from a fairly dismal starting point,” said Kingswood head of research Rupert Thompson.
“UK growth will undoubtedly receive a lift from a pick-up in business investment – now Brexit uncertainties have reduced – and significantly higher government spending. But it should still remain quite sluggish,” he continued.
“Considerable uncertainty remains over the timing and scope of any trade deals the UK will manage to secure – both with the EU and other major trading partners such as the US,” said Thompson.