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(Alliance News) - The pound's resurgence following the Conservative victory in Thursday's general election held back the FTSE 100 index of London blue-chips on Friday morning, while mid-cap stocks surged.
Raised hopes for a trade deal between the US and China also were giving all stocks a lift.
The FTSE 100 index was 57.73 points higher, or 0.8%, at 7,331.20, with UK-focused constituents managing to offset the effect of a stronger pound on the overseas earners.
However, the mid-cap FTSE 250 index, with its much more UK-focused stocks, was 889.22 points higher, or 4.3%, at 21,682.25. The the AIM All-Share index was up 1.0% at 908.49.
The Cboe UK 100 index was 0.8% higher at 12,447.47. The Cboe 250 was 4.4% higher at 19,540.20, and the Cboe Small Companies was up 0.5% at 11,399.30.
In mainland Europe, the CAC 40 in Paris was up 1.3%, while the DAX 30 in Frankfurt was also 1.3% higher.
The pound was quoted at USD1.3404 Friday, up from USD1.3127 at the London close Thursday.
UK Prime Minister Boris Johnson has hailed a political "earthquake" which saw Labour support crumble in its heartlands in the face of a Tory landslide.
Johnson was set to visit the Queen at Buckingham Palace with a comfortable majority after gambling on a snap election and winning big.
In his victory speech after retaining his own seat, he claimed a "powerful new mandate to get Brexit done" as his party headed for its biggest Commons majority since the Thatcher era.
Johnson later told jubilant aides in Conservative HQ: "We must understand now what an earthquake we have created."
The Tory landslide prompted Jeremy Corbyn to announce he will not lead the opposition Labour party into another election.
"The prospect of a better business environment for UK-listed companies is offsetting the devaluation of overseas earnings from a stronger currency. We are expecting pro-cyclical and more domestic shares to dominate the gains on the FTSE 100 today," said London Capital Group's Jasper Lawler.
"That might include the likes of banks and homebuilders. As a better reflection of the domestic UK economy, which stands to benefit from greater clarity on Brexit and the economy, the FTSE 250 index looks on course for a record high."
In the FTSE 100, domestic housebuilders surged, with Persimmon up 13%, Barratt up 10%, Berkeley up 11%, and Taylor Wimpey up 12%. FTSE 250 peer Crest Nicholson was 13% higher, with Bellway up 11% and Countryside Properties up 5.7%.
The UK's large-cap banks also were on the rise. RBS was up 11%, Lloyds 9.9%, and Barclays 7.7%. However, China-weighted HSBC was up just 0.2%, while similarly overseas focused Standard Chartered was down 1.2%.
US President Donald Trump has congratulated Johnson on his "great win" in the election, and said the UK and US would be free to strike a "massive" new trade deal after Brexit. The US president said the agreement had the potential to be "far bigger and more lucrative" than any deal which could have been made with the EU.
Wall Street closed at record highs on Thursday with reports the US and China were ready to strike a trade deal, and a tweet from Trump claiming an agreement was "VERY close".
Trump's tweet came after US media, including the New York Times and Bloomberg, reported the president had met with his top economic advisers Thursday afternoon to discuss arrangements ahead of a key deadline in the two countries' trade war.
The US was scheduled to impose new tariffs on USD160 billion worth of Chinese goods if an agreement was not met by Sunday.
"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" Trump tweeted minutes after the start of trading in New York on Thursday.
In Asia, the Japanese Nikkei 225 index closed 2.6% higher on Friday. In China, the Shanghai Composite ended up 1.8%, while the Hang Seng index in Hong Kong is 2.6% higher late on.
The Dow Jones Industrial Average closed 0.8% higher, the S&P 500 0.9% higher, and the Nasdaq Composite 0.7% on Thursday.
"Investors might have two early Christmas presents this week, a phase one trade deal between the US and China and Brexit getting done," added Lawler.
"Sentiment has been rising thanks to newfound optimism that the US can sign a phase one trade deal with China. Wall Street hit record highs in response to a tweet from President Trump. According to US sources, the deal has been agreed on both sides and just needs a sign-off from the US President," he continued.
Back on the LSE, utilities, which had come under threat of nationalisation by a Labour government, had a weight lifted off them. Centrica rose 6.9%, SSE by 9.6%, United Utilities by 7.1%, and Severn Trent by 7.3%.
Auto Trader was up 10% as HSBC raised it to Buy from Hold, while IAG rose 7.8% for the same reason.
FTSE 250 gold miner Centamin rose 1.5% as it appointed Chief Financial Officer Ross Jerrard as interim chief executive, following the departure of current boss Andrew Pardey, who will remain as an advisor until October next year.
The search for a permanent CEO is going well, Centamin said, with interviews now underway.
Centamin also has appointed Jim Rutherford as a non-executive director & deputy non-executive chair from the start of 2020. He replaces Gordon Edward Haslam, who will step down at the 2020 annual general meeting, when Rutherford will replace him in the role of chair.
Bowling alley chain owner Hollywood Bowl climbed 5.5% as it reported a "strong" financial year, with the company's outlook remaining solid.
Revenue in the 12 months to September rose 7.8% to GBP129.9 million, with pretax profit climbing 15% to GBP27.6 million. Like-for-like revenue growth was 5.5%, accelerating from 1.8% growth in the prior year.
Hollywood Bowl is paying a final dividend of 5.16 pence per share, as well as a special dividend of 4.50p, compared to a special payout of 4.33p the year before. These, alongside the interim dividend, take the year's total to 11.93p, up 13% year-on-year.
Chief Executive Stephen Burns said he was "delighted" with "another year" of strong growth, and he said the company has made a solid start to its new financial year.
Hurricane Energy rose 5.4% as it guided for revenue of USD165 million for 2019, and total production of 3.1 million barrels of oil, equivalent to 13,300 barrels per day. It produced no revenue in 2018, as the Lancaster field only came into production during this year.
Hurricane said the early production system at Lancaster is performing strongly, and the licence containing the field has also been extended for five years.
Looking to 2020, Hurricane has maintained guidance for production to be around 20,000 barrels of oil per day, though this excludes planned operational downtime.
The company is also lining up drilling programmes at on both Lancaster and the Greater Warwick Area. However, at Warwick, it will not be able to drill before June, and a rig will remain idle costing the firm USD10 million. Hurricane said it is looking at other options for the rig in that time.
A relatively empty economic calendar on Friday has US retail sales at 1330 GMT.
By George Collard; georgecollard@alliancenews.com
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