London-listed companies with exposure to the domestic economy soared on Friday for their best day in nearly a decade as hopes that Britain can seal a Brexit deal triggered explosive gains and a major reversal of fortunes for the much-shunned UK market.
Investors pounced on everything from banks like RBS to housebuilders and retailers such as Kingfisher, which owns DIY chain B&Q, after British Prime Minister Boris Johnson and his Irish counterpart, Leo Varadkar, said they had found โa pathwayโ to a possible Brexit deal.
The buying spree targeted some of the marketโs most beaten-down stocks and those considered most vulnerable to a downturn in consumer spending if the country crashes out of the European Union without a deal.
The FTSE 250 surged 4.2%, while the Dublin bourse , often considered a barometer of Brexit sentiment, jumped 3.7% to its highest since May.
The blue-chips, however, added a modest 0.8% in comparison as a rally in sterling triggered by Irelandโs optimism of Britain leaving the European Union in an orderly fashion hit the dollar-earning constituents of the index.
The JP Morgan index that follows UK-listed companies making their money at home soared nearly 8% on its best day since the basket was created nearly three years ago.
Four of the so-called UK โbig banksโ, namely RBS, Lloyds, HSBC and Barclays, together added roughly 12 billion pounds to their combined market cap with rises of between 2% and 12.3%.
Housebuilders Persimmon, Barratt, Berkeley and Taylor Wimpey, whose businesses are heavily reliant on the health of the UK economy, jumped between 8.8%-12%.
After nearly three years of chaotic negotiations, signs that a divorce deal could finally be nailed down were enough to push London-listed companies with exposure to the domestic economy to a premium over the FTSE 100 for the first time since Theresa May stepped down as Prime Minister.
The explosive gains in UK stocks come despite Johnson offering little details on the terms of a divorce deal, highlighting desperation among traders to cling to any signs of a positive development.
โThe chances of a deal seem to have improvedโฆ but hurdles still remain. Time to thrash out the details of the deal are tight, and then there is the question of parliamentary approval,โ UBS economist Dean A. Turner said.
British lawmakers had defeated former PM Mayโs Brexit plans three times before she finally gave up and stepped down.
The broader sentiment was also upbeat after U.S. President Donald Trump stirred hopes of a trade agreement with China, calling the first day of talks โvery goodโ.
โWeโre enjoying a much more uplifting end to the week as traders see cause for optimism in the two painful negotiations that have gripped markets in recent years,โ Oanda analyst Craig Erlam said.
The FTSE had confirmed a โDeath Crossโ pattern in the previous session as its 50-day moving average (DMA) crossed below the 200 DMA, a technical pattern usually seen as a warning that more losses are likely in the near term.
A notable blemish on the main index was a 4% drop in ad firm WPP after French rival Publicis cut its sales view for the second time.
Luxury brand Burberry, which advanced in the previous session on a positive read-across from LVMH, slipped 2.1% after German rival Hugo Boss cut its annual forecast.
AIM-listed Dart Group surged 17% after the owner of British airline and tour operator Jet2 raised its annual profit view and said it had seen stronger demand for some products since Thomas Cook collapsed.
Fridayโs recovery helped the FTSE 100 notch its best weekly performance since late August, after it suffered its steepest weekly fall earlier this month due to escalating U.S.-China trade tensions and recession fears.
REUTERS
