December 16, 2019 / 8:38 AM / 2 months ago

China-U.S. trade deal, Brexit hopes turbo charge UK stocks

(Reuters) - British shares continued to power higher on Monday as a preliminary U.S.-China trade deal and hopes of an orderly Brexit after UK Prime Minister Boris Johnson’s election victory saw investors flock to perceived riskier assets, such as equities.

FILE PHOTO: Traders looks at financial information on computer screens on the IG Index trading floor in London, Britain February 6, 2018. REUTERS/Simon Dawson

The benchmark FTSE 100 .FTSE soared 2.3%, its biggest one-day percentage gain in nearly a year, while the midcap FTSE 250 .FTMC surged 1.9% and hit a new all-time high. Both moves followed hefty gains in the previous session.

Markets breathed a sigh of relief after U.S. Trade Representative Robert Lighthizer said a ‘phase-one’ trade deal with China was “totally done”, boosting trade-exposed UK stocks including HSBC (HSBA.L), Burberry (BRBY.L) and miners.

Meanwhile, domestically focussed stocks continued to benefit from the British election euphoria, with banking big shots Lloyds (LLOY.L), Barclays (BARC.L) and RBS (RBS.L) jumping between 3.7% and 5.5%.

Victory for Johnson’s Conservative Party has reassured markets that Britain is likely headed for a swift exit from the European Union, dispelling some uncertainty after 3-1/2 years of political chaos.

“You are going to have a combination of both international investors putting money into the UK market ... plus within the UK you are going to have more commitment of capital to projects and businesses than we’ve had previously,” said Scott Thiel, chief fixed income strategist at BlackRock Investment Institute.

Tobacco firm BAT (BATS.L) was the biggest blue-chip gainer after Bank of America Global Research handed the stock a rare double upgrade.

Notable news-driven moves were limited to midcaps.

Mike Ashley’s Sports Direct SPD.L leapt 31%, its biggest ever one-day gain, after the retailer, which will change its name to Frasers Group, forecast core earnings growth of as much as 15% this financial year .

Tullow Oil (TLW.L), which lost more than half its value last week, dropped 10% after ratings agency S&P Global cut its long-term credit rating and HSBC downgraded the stock.

Cineworld (CINE.L) ended 2.5% higher. The cinema operator had earlier shed nearly 9% after announcing a $2.1 billion takeover of Canada’s Cineplex (CGX.TO) to be financed by raising more debt, which analysts said had made investors uneasy.

Graphic - Sports Direct lags rival JD Sports this year: here

Reporting by Shashwat Awasthi and Muvija M in Bengaluru, Editing by Sherry Jacob-Phillips and Mark Potter

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