Labour Victory Sparks Surge in UK Domestic Stocks

Britain's domestic stocks surged after a major Labour Party election victory, raising hopes of an economic boost. The FTSE 250 index hit a two-year high, driven by positive investor sentiment and plans to build 1.5 million homes. Notably, British homebuilders saw significant gains.

Britain's domestic-focused stocks saw their best week in over five months following the Labour Party's decisive election win, which has fueled investor optimism for an economic uplift.

The FTSE 250, which is more domestically oriented, rose by 0.9%, nearing the 21,000 mark, its highest level in over two years. Fiona Cincotta, a senior markets analyst at City Index, noted that Labour's economic policies are expected to have a greater impact on the FTSE 250 compared to the FTSE 100.

Homebuilding companies were among the top gainers on the FTSE 100, benefiting from Keir Starmer's pledge to construct 1.5 million new homes in five years. As a result, the UK homebuilders index soared by 2.5%, lifting shares in major firms like Persimmon, Taylor Wimpey, Vistry, and Barratt by up to 3.4%.

Despite a 0.5% drop in the blue-chip FTSE 100, the broader market sentiment remained positive. Goldman Sachs has upgraded its UK GDP growth forecast and highlighted the FTSE 250 as a key index to watch under the Labour government. Webull UK CEO Nick Saunders emphasized the significance of having a strong government capable of implementing changes, a rarity in recent UK history.

Additionally, the yield on 10-year British government bonds fell to 4.129%, further boosting market sentiment. Meanwhile, the Bank of England's potential rate cuts are now highly anticipated, with a 61% chance of initiation at the upcoming meeting.

In the U.S., job growth slowed in June, causing a rise in the unemployment rate to a 2.5-year high of 4.1%, leading to fresh intraday highs for the Nasdaq and S&P 500.

(Disclaimer: With inputs from agencies.)