FTSE 100 leaps after Tory win adding £35bn to shares in major boost for pensions and mortgages

THE UK stock market enjoyed a huge surge as it reacted to Boris Johnson’s decisive win and victory speech.

Billions of pounds were added to the value of the FTSE100 index of leading companies while the FTSE250 – made up of mid-sized domestically-focused firms –  hit a record high.

In early trading, the FTSE100 jumped by 1.7 per cent, adding more than £35billion to the value of the UK’s top shares.

That gives a massive boost to the pensions and Isas invested in them.

After falling back slightly in early afternoon, the index again hit that level following the prime minister's speech.

The extraordinary share price reaction – dubbed the "Boris bounce" – followed a sharp rise overnight in the value of the pound.

WHY ARE MARKETS EUPHORIC?

MARKETS have rallied because they did not expect the Tories to romp home by such a majority.

Once the stock market opened, shares in politically-sensitive sectors such as house building and banking rocketed.

So did stocks in water, rail and energy companies, as the threat of nationalisation under a Corbyn government evaporated.

The "Boris bounce" from a Tory win had been expected – but was even better than anticipated. That was because of the size of the majority.

However, the euphoria may be short-lived. The election may be settled, removing a layer of uncertainty – but there are big political questions that are not.

Traders are already talking about the formidable challenge of completing a trade deal with the EU by this time next year, along with the prospect of a new Scottish independence referendum.

As the Conservative win was confirmed, shares in companies that had faced the possibility of nationalisation under a Labour government shot up.

Utility Severn Trent, BT and National Grid were among the main risers as investors showed their relief by buying in to the firms.

UK housebuilders also saw big gains, with a huge 11 per cent rise for Persimmon on market open.

Neil Wilson, chief market analyst at Markets.com, said housebuilders had been undervalued and rose "on hopes that construction will benefit from the Conservative victory".

"We should also consider the potential risk that a Labour government could have posed to their profits being removed," Mr Wilson said.

Shares in banks exposed to the UK economy rose sharply. Barclays, RBS and Lloyds were up 8 per cent, 12 per cent and 8 per cent respectively in early trading.

M&S was among the winners as traders bet on a post-election boost for retailers.

Michael Hewson, chief market analyst at CMC markets, hailed the rally as "incredible" given the jump the pound which typically depresses blue chip stocks that earn in dollars.

He added: "The FTSE 100 and FTSE 250 have seen a new lease of life this morning, surging in early trade as the various nationalisation discounts that have been in place since 2017 start to roll-off for companies that have found their valuations depressed by concerns over government appropriation, in the event of a Labour win.”

"This is [an] incredible reaction given the rally in the pound as well, but it also speaks to the relief of a pressure valve being released as money flows back into UK assets, now that the risk of a Labour government has been comprehensively dispatched".

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