FTSE falls more than 1% but Randgold and Fresnillo in demand

Discussion in 'Market News' started by Lily, Jun 27, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Early calm soon disappears as investors continue to weigh up Brexit fallout

    Leading shares continue to decline as the volatility following the vote for the UK to leave the European Union.

    Early reassurance following comments from chancellor George Osborne appears to be wearing off, and the FTSE 100 has now fallen 88.50 points or 1.45% to 6050.19. The FTSE 250 mid-cap index, which is more exposed to the UK economy, is down 3.6%.

    The chancellor didn’t say an awful lot, but it does look like Article 50 will definitely be delayed until a new PM is appointed – probably November - and can lead the renegotiations. In this regard he has the backing of Angela Merkel, who has been a lot softer than some of her European counterparts.

    The longer the delay, the greater chance of a fudge to backtrack on the referendum. This is the kind of uncertainty that might offer a flicker of hope to nervous investors. A second vote is not off the table, especially with immense pressure coming from Scotland and Northern Ireland, not to mention the 500 or so MPs who supported Remain.

    After a surprise Brexit vote, we adjust our UK bank forecasts and recommendations. We lower RBS from hold to sell, given that its lower level of profitability gives it less scope to absorb bumps in the road. But we retain our buy recommendations on Lloyds, Barclays and HSBC, albeit with target prices significantly lower, and retain our hold rating and 575p target price on Standard Chartered.

    ITV’s share price fell around 20% on Friday post-the Brexit vote. Yet nothing has changed with the fundamentals and, even if we did assume an advertising decline of post-Lehman’s proportions, ITV would still look cheap with a very attractive dividend yield. The decline in the share price and the fall in sterling also potentially increases the chances of M&A activity.

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