Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

FTSE's post-Brexit recovery falters as property stocks weaken

Published 04/07/2016, 17:05
© Reuters. A worker shelters from the rain as he passes the London Stock Exchange in the City of London
UK100
-
GSK
-
RRS
-
PSN
-
BLND
-
LAND
-
TW
-
FRES
-

By Sudip Kar-Gupta and Atul Prakash

LONDON (Reuters) - Britain's top shares index retreated from a 10-month high on Monday as weaker property and housebuilding stocks weighed on the market and halted its rebound from a slump caused by the United Kingdom's decision to leave the European Union.

The blue-chip FTSE 100 index (FTSE), which rose in the past four straight sessions, closed 0.8 percent lower at 6,522.26 points, after climbing to its highest level since August 2015 earlier in the day.

While the FTSE 100 has recovered since June 24, the index remains down by more than 8 percent in U.S. dollar terms since the vote, as the slump in sterling has reduced the value of the British market in dollar terms.

Property stocks British Land (L:BLND) and Land Securities (L:LAND) were the worst performers, down 7.1 percent and 5.7 percent respectively, while housebuilders Persimmon (L:PSN) and Taylor Wimpey (L:TW) fell 7.8 percent and 6.3 percent.

That sector was hit as data on Monday showed Britain's construction industry suffered its worst contraction in seven years in June as concerns over Britain's vote on quitting the EU intensified.

"Although short term stock market gains may be realised as expectations inflate over central bank intervention, the key fundamentals and ongoing concerns which have punished global stocks still remain intact in the background," said FXTM research analyst Lukman Otunuga.

The FTSE 100 initially fell around 6 percent after the referendum result on June 24 showed Britain had voted to quit the EU, a result which pummelled sterling on currency markets.

The market recovered last week, helped by expectations of more central bank help to stabilise markets. It has also been aided by the fact that a weaker sterling can help the FTSE's international companies, since a weaker pound can help British companies export overseas.

Nevertheless, several analysts remained cautious over the market outlook, given the risks generated by Brexit, with the British economy expected to weaken as a result.

"At the moment, we have seen selling at these levels, reducing exposure into any rallies that present themselves such as the recent move higher in GlaxoSmithKline (L:GSK). Many are opting to sit in cash, waiting for a market pull back," said Lewis Jones, stockbroker at Cornhill Capital.

On the positive side, precious metals miners set new peaks, tracking gains in gold and silver prices, with Randgold Resources (L:RRS) climbing to a record high and Fresnillo (L:FRES) at its best level since late 2012. Their shares closed 4.4 percent and 7.7 percent higher respectively.

© Reuters. A worker shelters from the rain as he passes the London Stock Exchange in the City of London

Randgold shares have spiked 120 percent so far this year, while Fresnillo has jumped 166 percent.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.