British stocks surge after Johnson’s Conservatives win majority

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Homebuilders and banks in the U.K. rallied on Friday in relief of 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 a majority in Parliament. Read more about the election.

The FTSE 250 MCX, +4.02%  climbed 3.9% to 21609.70. Investment managers, real estate investment trusts and homebuilders led the way as investors flocked to stocks more exposed to the domestic economy. Double-digit gainers included lender Virgin Money UK VMUK, +14.63%  , construction product supplier SIG SHI, +3.03%  and electronics retailer Dixons Carphone DC, +7.93%  .

The large-cap FTSE 100 UKX, +1.47%   sported more modest gains, rising 1.1% to 7351.89.

The surge in the British pound GBPUSD, +1.8156%  was a drag from companies that generate most of their revenue outside the U.K., such as pharmaceutical GlaxoSmithKline GSK, -2.08%   and beverage maker Diageo DGE, -0.88%  .

Large-cap advancers included homebuilders Persimmon PSN, +11.58%  , Taylor Wimpey TW, +12.41%, Berkeley Group BKG, +10.62%  and Barratt Developments BDEV, +9.90%  . U.K. banks Royal Bank of Scotland RBS, +11.24%   and Lloyds Banking Group LLOY, +8.05%  also surged.

The yield on the benchmark 10-year gilt TMBMKGB-10Y, +4.28%  rose 5 basis points to 0.86%. Prices move in the opposite direction to yields.