London Markets: British pound and stocks continue to rise after U.K. election

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Associated Press

U.K. Prime Minister Boris Johnson

The British pound climbed and U.K. equities boomed on Monday in the wake of last week’s election, which kept the Conservative Party in power with a majority.

The British pound GBPUSD, +0.3301% rose to $1.3366 from $1.3329. The currency did rise above $1.35 shortly after Prime Minister Boris Johnson’s party convincingly won the general election, but then lost some of its gains.

The pound is still up 7.5% against the greenback over the past three months.

Traders on Monday preferred large caps to mid caps, but both advanced. The FTSE 100 UKX, +2.20%  jumped 1.85% to 7,489.39, while the mid-cap FTSE 250 MCX, +1.23%  gained 1% to 21,721.00.

Analysts at Bank of America expect the FTSE 100 to reach 7,700 by March. “Domestically exposed U.K. stocks have already outperformed foreign-exposed U.K. stocks by 14% since mid-August — and our macro assumptions imply near-term downside of up to 7%. As a consequence, we remain underweight domestic vs foreign-exposed U.K. stocks, a position we have held since late October,” they told clients.

Between July 23 and Dec. 13, U.K. airlines surged 31%, while U.K. automobile plays fell 46%, according to ratings agency Standard & Poor’s data. More generally, so-called domestic revenue plays rose 17% over that timeframe, while foreign revenue plays fell 5%, according to S&P.

British American Tobacco BATS, +4.33%  was the best FTSE 100 performer on Monday, rising over 4%, as Bank of America upgraded the company to buy from underperform.

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