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FTSE 100 continues rebound but Royal Bank of Scotland falls again

Discussion in 'Market News' started by Lily, Jul 1, 2016.

  1. Lily

    Lily Forum Member

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    Banking shares weaker on worries about UK recession and rate cut effects

    Leading shares are heading for their best week since December 2011, but banks continue to miss out on the post-Brexit bounce.

    Concerns about a UK recession and comments from Bank of England governor Mark Carney hinting at a possible interest rate cut in the summer have revived worries about the outlook for the banking sector.

    European markets have started the day in a fairly positive fashion as we come to the end of what has been a turbulent and historic week. Having traded as low as 5,938 in the wake of last week’s surprising Brexit vote the FTSE100 looks on course to post its best week since 2011 as the weaker pound helped pull the index back above its pre Brexit vote highs by the middle of the week. While it is no doubt true that on a currency basis the FTSE100 is still down in euro and US dollar terms, the fact that it is one of the highest yielding blue chip benchmarks at over 4% could well be providing a pull factor in an era of ever decreasing interest rates.

    The shares have not been immune from Brexit but Genus’s business should be fairly immune. Only around 10% sales are generated in the UK and weaker sterling should a drive at least a 7% translation boost to profits which is reflected in our forecasts. [There are] three new technologies which we think will transform Genus’s growth (Sexed semen, IVF in cattle and Gene editing). Finally, we believe current trading is solid with robust US and China hog markets offsetting weaker conditions in Latin America and, especially, dairy.

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