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Property and financial shares slide as referendum fallout hits stock markets Property and financial shares slide as referendum fallout hits stock markets
(35 minutes later)
Shares in housebuilders and banks suffered further losses on Monday as the economic and political ramifications of the Brexit vote continued to weigh on markets.Shares in housebuilders and banks suffered further losses on Monday as the economic and political ramifications of the Brexit vote continued to weigh on markets.
The pound remained under pressure on the foreign exchange markets, although it regained some ground after an early morning announcement from George Osborne, the chancellor, who said he would not resign and insisted the country was “ready to confront what the future holds for us from a position of strength”. The pound remained under pressure on the foreign exchange markets, although it regained some ground after an early morning announcement from George Osborne, who said he would not resign and insisted the country was “ready to confront what the future holds for us from a position of strength”.
The FTSE 100 was down 22 points at 6,115, with easyJet among the biggest of the fallers after the budget airline warned profits would be lower than expected because of the impact on consumer confidence. The chancellor spoke after turmoil on global markets on Friday wiped $2tn from share prices, the largest ever one day fall, surpassing even the darkest days of the 2008 banking crisis.
Shares in banks were also down, with Barclays falling by 5%. Analysts at Bernstein said: “The UK referendum is a game changer for Barclays. The group’s portfolio of businesses, notably the investment banking operations, are overly prone to downside risk on earnings and capital”. Osborne’s words also gave investors confidence to buy gilts, UK government bonds. The yields on gilts, which move inversely to prices, fell below 1% for the first time, amid expectations that the Bank of England will cut interest rates from their current low of 0.5% to zero.
Bank of England governor Mark Carney has abandoned plans to fly to Portugal later in the week for a meeting with central bank governors and policymakers and will remain in the UK to oversee the response to the crisis.
The FTSE 100 was down 61 points at 6,076, or 1%, but the fall was not as large as had been feared. Before Osborne spoke, the index of leading shares had been called 180 points lower.
Even so, there were some hefty fallers: easyJet suffered one of the biggest losses as the budget airline warned profits would be lower than expected because of the impact on consumer confidence. Its shares slumped 16% to a three-year low of £10.99.
Shares in banks were down again, with Barclays falling by 5%. Analysts at Bernstein said: “The UK referendum is a game changer for Barclays. The group’s portfolio of businesses, notably the investment banking operations, are overly prone to downside risk on earnings and capital”.
Bailed-out Royal Bank of Scotland and Lloyds Banking Group were also among the top 10 fallers, as the market reckoned that the government’s attempt to sell off its remaining stakes has now stalled. Housebuilders and companies reliant on providing supplies to the housing market were also down.Bailed-out Royal Bank of Scotland and Lloyds Banking Group were also among the top 10 fallers, as the market reckoned that the government’s attempt to sell off its remaining stakes has now stalled. Housebuilders and companies reliant on providing supplies to the housing market were also down.
Outside the FTSE 100 index, shares in estate agents Foxtons were down 17% at 111p after it spelt out that impact of Brexit on the high end of the property market. Outside the FTSE 100, shares in estate agents Foxtons were down 17% at after it spelt out the impact of Brexit on the high end of the property market, driving its shares to half the value at which they were floated at three years ago.
The fall in the FTSE 100 was not as large as had been feared – before Osborne spoke, the index had been called 180 points lower. Its losses were cushioned by commodity-reliant companies such as Fresnillo and Randgold. The FTSE 250 index, which comprises companies more closely linked to the UK economy, was down 2%. Challenger bank Virgin Money was off 9%, as was headhunters Hays. Engineering firm Balfour Beatty, online supermarket group Ocado and building group Redrow were also lower.
Much of the focus has been on the value of the pound, which had plunged to 31-year lows as the referendum result came in during Thursday night. Legendary speculator George Soros, who made $1bn when sterling fell out of the exchange rate mechanism in 1992, had warned of a “Black Friday” in the event of Brexit. His spokesman stressed that he not made a profit from the events of last week. Analysts said the Chancellor’s intervention had helped to calm some nerves. “It seems that George Osborne’s appearance this morning, his first since before the referendum results were announced, has somewhat calmed investors’ fears, the Chancellor joining many of his Tory colleagues in claiming there is no rush to trigger the dreaded Article 50 despite increasing pressure from Europe,” said Connor Campbell, analyst at spread-betting firm SpreadEx. Article 50 is the formal process by which the UK withdraws from the EU.
“George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union,” a spokesman for Soros said according to Reuters. “In fact, he was long the British pound leading up to the vote.” The delay to invoking article 50 was welcomed by employers’ body the CBI. “Never has there been a more important time to put the interests of the country ahead of party politics,” said Carolyn Fairbairn, CBI director general.
She called for the government “to preserve the openness of the UK’s economy” by protecting “tariff and barrier-free access to the single market”.
“There is one other action that needs to be taken immediately. The government should remove uncertainties over the long term right to stay in the UK for those already working here as soon as possible,” said Fairbairn.
Much of the focus has been on the value of the pound, which had plunged to 31-year lows as the referendum result came in during Thursday night. Legendary speculator George Soros, who made $1bn when sterling fell out of the exchange rate mechanism in 1992, had warned of a “Black Friday” in the event of Brexit. His spokesman stressed that he not bet against the pound last week.
“George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union,” a spokesman for Soros said according to Reuters.
“However, because of his generally bearish outlook on world markets, Mr Soros did profit from other investments,” the spokesman said.“However, because of his generally bearish outlook on world markets, Mr Soros did profit from other investments,” the spokesman said.