* FTSE 100 up 1 pct, boosted by sterling's fall
* Housebuilders hit by domestic turmoil
* REITs dip on Brexit fears
* Mid-caps pull out of slump
* Investors see softer Brexit after election jolts May
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By Helen Reid
LONDON, June 9 An election upset for Prime
Minister Theresa May sent Britain's major share index shooting
up on Friday, feeding off a weaker currency, while housebuilders
suffered losses as uncertainty about the UK's leadership grew
before Brexit negotiations.
The FTSE 100 gained 1 percent after Britons dealt
the governing Conservative party a punishing blow, denying May
the increased mandate she had gambled on and forcing her into an
alliance with Northern Ireland's DUP party to command a majority
Individual winners and losers were largely driven by
currency, and some sectors seen as particularly sensitive to
Brexit instability also saw heavy losses.
But a buoyant U.S. market added fuel to British shares as
investors largely shrugged off the political turmoil, with
traders highlighting volume and volatility were subdued compared
with the Brexit vote and U.S. election. Money managers eyed
medium-term tailwinds from the shock result.
"It's not being seen as a global risk-off event, it's being
seen as a domestic political event," said Caroline Simmons,
deputy head of the UK investment office at UBS Wealth
Sterling fell as much as 2.4 percent before recovering some
of its losses. It boosted the internationally focused,
exporter-heavy blue chip index, while stocks with greater
domestic exposure were under pressure.
BP, Smurfit Kappa and Diageo, which
derive most of their earnings overseas, were top gainers.
Housebuilders Taylor Wimpey, Barratt Development
and Persimmon all fell 1.3 to 3.3 percent in a reaction
to the domestic uncertainty.
Banks RBS and Lloyds also weighed. Their
more internationally focused peers HSBC and Standard
Gold miner Fresnillo jumped more than 3 percent as
investors rushed to the safe haven asset.
Large caps suffered their first weekly loss since late
April, however, as hesitant trading earlier in the week took its
Mid caps, which derive a larger part of earnings from the
UK, pulled out of their dive with an hour of trading to go.
Investors snapped up stocks that had sunk earlier as concern
around economic instability swirled.
"Unless we see signs the bottom is falling out of UK
consumer spending and/or the pound, these moves are an
opportunity to buy a quality business trading below intrinsic
value," said Gary Paulin, head of global equities at Northern
The FTSE 250 ended 0.1 percent higher.
Challenger banks Metro Bank, OneSavings
Virgin Money, meanwhile, saw some of the sharpest falls
as analysts pointed to their high gearing to domestic lending.
Pub chain Wetherspoons fell more than 3 percent,
along with large-caps Whitbread and IAG, in a
wobble among stocks exposed to consumer sentiment which tends to
be dented by political turmoil.
Real estate investment trusts (REITs), seen as a barometer
of sentiment on Brexit due to their holdings of London office
space, were the biggest FTSE all-share fallers on the day.
"There's a lot of emotional trading on the back of news such
as this," said Marie Owens Thomsen, global head of economic
research at Indosuez Wealth Management in Geneva. "I would guard
against reading too much into these moves."
And silver linings were found as some investors, including
star fund manager Neil Woodford, predicted the election would
yield a softer Brexit, improving the outlook for British stocks
in the medium term.
(Reporting by Helen Reid, editing by Larry King)