The announcement of Theresa May as UK prime minister and hopes of a Bank of England rate cut have helped push the FTSE 100 into bull market this week, as it closed at 6682 on Monday.
The large-cap index is up more than 20 per cent from its recent low of 5,537 on 11 February.
Mining stocks have led the market with Glencore doubling in price since its February lows, while BHP Billiton and Rio Tinto are up around 50 per cent.
However, Laith Khalaf, senior analyst at Hargreaves Lansdown, says: “There have been very divergent fortunes amongst the big blue chips, with some airlines, house builders and banks being left behind by the rest of the market”
Three out of 10 stocks on the index are trading below their February price.
Khalaf says the overall performance of the FTSE 100 is testament to the international make-up of the index, which benefits from the weak sterling, and the market’s “long-standing faith in central bankers to come to the rescue by turning on the printing presses”.
On Monday, Fitch released a report on UK corporates set to be impacted by the weak pound, with New Look and Tesco among those with significant costs in other currencies.
“For income investors the stock market is really the only game in town, unless they want to take on the high costs and poor liquidity of the property market,” Khalaf says, adding that the markets will be disappointed if there is no action on rates on Thursday.
Last week, markets were pricing in a 78 per cent chance Bank of England governor Mark Carney will announce a rate cut this week.