All but one stock in the FTSE 100 Index rallied after a sweeping election victory for David Cameron’s Conservative party.
The FTSE 100 advanced 2.3 percent to close at 7,046.82 in London, rebounding from a one-month low. Trading volume was almost double the 30-day average. The FTSE 250 Index, a gauge of smaller companies, rallied 2.8 percent to a record.
Banks contributed the most to the gains, with Barclays Plc, Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc climbing more than 3 percent. Ending a period of uncertainty for investors, the Tories defied opinion polls that had showed the Conservatives neck-and-neck with Ed Miliband’s Labour Party. The result means Cameron will return to his post with a majority in Parliament.
“It’s great for sentiment,” said Rob Jones, co-head of European equities at UBP Investment Management in London. “Nobody was calling for such a strong result, certainly not an outright majority. It makes it more likely that the U.K. is able to sustain its current level of growth. There are now some new ideas that this result makes us more likely to invest in.”
Jones said he holds shares of Taylor Wimpey Plc, which rallied to its highest price since 2007, as well as Next Plc and Dixons Carphone Plc. Babcock International Group Plc, a key supplier to the British Ministry of Defence, climbed 9.4 percent for the biggest advance in the FTSE 100. Utility Centrica Plc jumped 8.1 percent.
Homebuilders Barratt Developments Plc and Persimmon Plc added more than 5 percent. BT Group Plc gained 3.7 percent.
Stocks that rely on domestic sales fared well. Provident Financial Plc rose to a record. It’s one of the biggest components of the FTSE 250 and gets all of its revenue from the U.K. and Ireland. Betting firm William Hill Plc, which generates 82 percent of its sales in Britain, gained 5.7 percent, the most in more than a year.
The advances put the FTSE 100 0.9 percent higher for the week. The gauge has gained 7.3 percent this year, compared with a 16 percent jump for the Euro Stoxx 50 Index.
Stock swings had remained tame in the days leading up to the election, contrasting with a surge in pound volatility. A gauge tracking FTSE 100 moves fell 8.3 percent from a high last month through Thursday, reaching a a six-week low relative to a measure for the euro area this week. It slumped as much as 50 percent on Friday.
The focus now turns to Cameron’s pledge to hold a referendum on whether the U.K. should leave the European Union.
“The prospects of a referendum on EU membership shouldn’t rattle markets,” said Brian Jacobsen, a chief portfolio strategist at Wells Fargo Asset Management in Menomonee Falls, Wisconsin. “It’s highly unlikely a Brexit will occur. Membership has its privileges and those would be costly to give up.”