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BREXIT LIVE: City reaction as Britons choose leave

That's it from us for a very volatile Friday, more Brexit reaction to follow on Monday.
Britain out of the European Union
The British public has chosen to leave the EU .... now what?

Stockbroker says UK will “muddle through” following Brexit vote - 3:15pm

Mark Dampier, research director at Hargreaves Lansdown, told Proactive Investors: “generally speaking it has been pretty chaotic in the markets” adding that he thinks investors had priced in a ‘remain’ vote.

“The markets have just had to do a full 360 turn”, he added.

 

Britain will want to keep most EU regulations on financial services - 3:00pm

New York headquartered corporate advisors Duff & Phelps expects Britain will want to retain much of the EU financial services regulations, given that it played a “big part” in the drafting process.

“Practically, the Government will not wish to risk destabilizing the Financial Services industry by subjecting it to additional disruption and uncertainty,” Duff & Phelps said in a statement.

It added: “When the UK gives notice under Article 50, a minimum two-year period of negotiation will follow. 

“This negotiation will be a complex process, but we should not necessarily expect to see a great deal of change in the arena of Financial Services since the UK is likely to adopt most EU legislation in this area.”

Morgan Stanley has denied it is moving 2,000 British jobs to Dublin or Frankfurt - 2:50pm

Reacting to a press report from earlier in the day, the US investment banking group described the story that it was moving 2,000 jobs from London as “completely false”.

Nevertheless, Morgan Stanley has previously said it could change its European headquarters to either Dublin or Frankfurt if there was a Brexit.

Lower interest rates and quantitative easing may follow Brexit - 2:40pm

Capital Economics reckons British policymakers have scope to respond to pending weaknesses in the UK economy - it also suggests the near-term hit could fall short of the more pessimistic forecasts.

“We think that a cut in interest rates in the near term looks likely, and possibly even a re-starting of the Bank of England’s quantitative easing programme,” Jonathan Loynes, Capital Economics chief European economist said in a note.

“Meanwhile, for all the talk of a post-referendum emergency “austerity budget”, we think the Chancellor (whoever that might be!) would be more likely to let his fiscal rules slide.

“In any case, the fiscal mandate has a get-out clause if growth weakens materially.”

No immediate impact on credit ratings for UK banks, says S&P - 2:20pm

Shares in Barclays Plc (LON:BARC), Lloyds Banking Group Plc (LON:LLOY) and Royal Bank of Scotland Group Plc (LON:RBS) were among the worst hit on Friday as they plummeted 20%, 21% and 17% respectively.

The Brexit may in the future impact upon growth in the banking sector, availability of funding, and the ‘public balance sheet’, according to credit ratings agency S&P, though it is initially holding off a downgrade.

In a statement the ratings agency said: “the leave vote has no immediate impact on the ratings on UK domestic commercial banks.

“We see the effects of a leave vote on these banks as indirect, arising from potential adverse consequences for economic activity, new business volumes, asset prices, and demand for UK-related debt.”

S&P more broadly, however, noted its past warning that the leave vote would “deter investment in the economy, decrease official demand for sterling reserves, and put the UK's financial services sector at a competitive disadvantage.”

It separately added that UK GDP growth will fall by 1% percentage point in 2017, though that assumes foreign investment into the UK doesn’t “completely dry up” following the Brexit vote.

“While the full economic impact of Brexit is not likely to become clear for some years, what's for sure is that uncertainty and transitional costs - of the UK of pulling out of the EU - are likely to slow growth materially.

Tortuous job market predicted by recruitment website Indeed - 2:00pm

Mariano Mamertino, an economist working for Indeed, said: “A further, prolonged period of doubt will do little to encourage employers who have already delayed making hiring decisions to come off the fence.

“In the immediate term, some employers who deferred recruitment during the referendum campaign may now start to hire if they decide they can wait no longer.

“But the wider outlook remains hard to read, despite Despite Mark Carney’s pledge to do whatever it takes to prop up the UK economy.”

Mamertino described the Britain’s rate of job creation as “fragile at best”.

He added: “In the longer term, crucial decisions will need to be made about what sort of labour market we want in Britain.

“UK employers have benefitted from the ability to recruit talent from overseas, and many Britons have seized the opportunity to live and work in other EU countries.

“While it’s unlikely that the shutters will suddenly be brought down on the English Channel, the free movement of workers has clear economic benefits - and it’s essential that British businesses can continue to be able to get the people they need to fill the jobs available.”

“Focus on fundamentals” stockbroker AJ Bell warns - 1:40pm

Retail investors must be very careful when trying to “time the market” in the wake of the Brexit vote, according to stockbroker AJ Bell.

Russ Mould, AJ Bell investment director, says investors need to stay focused on profits and cashflow growth, the things that he says really drive share price valuations over the long term.

“Market volatility driven by sentiment rather than company fundamentals is normally short-term and people should not panic or get over excited,” he said in a note.

“In the end it is profit and growth that drives company valuations over the long term and people should not lose sight of that when making decisions about their portfolios.

“Ultimately the price paid for a security is the ultimate arbiter of return and some long term investors may see today’s market fall as an opportunity to pick up quality stocks at a depressed price.”

‘Independence Day’ equals ‘Comeuppance Day’, says City Index - 1:35pm

“It’s now clear that aside from more speculative and protective assets, markets have spectacularly mispriced the risk of a Brexit, even after several months of preparation,” said Ken Odeluga, analyst at City Index.

He added: “The FTSE 100's tumble of as much as 8.6%, so far, could in fact be described as reassuringly contained, under the circumstance.

“The fall was no further than was indicated by the futures market, and just slightly deeper than the widest possible standard deviation of the last month of trading (judging by weighted average Bollinger Bands).

“It's early days, but if contained FTSE impact is a sign of some orderliness in today's market proceedings that can be sustained, then the absolute worst-case scenario for global markets might be avoided.”

“Of course, severe cross-market value destruction has already taken place and will reverberate for years.”

Cigarettes and pop could take edge off Brexit stress - 1:30pm

British American Tobacco Plc (LON:BATS) and Imperial Brands Plc (LON:IMB) are among the ‘most compelling’ defensive shares to buy in the aftermath of the Brexit vote, according to Whitman Howard Equity Research.

In a note, Whitman Howard claims the larger companies in the UK’s Fast Moving Consumer Goods (FMCG) sector should overall be unaffected by the Brexit vote.

“Any investors looking to make a macro call should consider positively the predictable demand for large FMCG companies’ products and their international exposures,” it said.

“The UK tobacco sector looks most compelling. Among small and mid-caps, the soft drinks sub-segment looks particularly well placed.”

"The world has not ended," FXPro tells Proactive Investors - 1:15pm

Simon Smith, chief economist at foreign exchange broker FX Pro, told Proactive Investors “the reaction of sterling at least is reflected the fact that the world’s not ended, the sun is still shining, the economy is still ticking along and nothing is going to change for at least the next few months”.

 

SPANKED! Financial Spreads founder laments ‘sadomasochistic’ City - 1:00pm

Adam Jepsen, founder of Financial Spreads, reckons the market didn’t see the Brexit vote coming because investors and gamblers kidded each other on in a ‘self-fuelling’ prophecy.

“If ever proof was needed that the financial markets just aren't that clever, this could be it,” Jepsen said in a note.

“We know the markets get things wrong. We have learnt this lesson before.  We will be taught this lesson again. And it seems that we like to learn the hard way.

“There's a sort of quasi-sadomasochistic feeling to the whole thing.”

He added: “We had a false self-fuelling prophecy rather than a self-fulfilling prophecy.

“Investors were looking at the bookmakers' odds for guidance and reassurance. Gamblers were looking at the financial markets for guidance and reassurance.”

“Each assumed the other was right and they just fuelled each other to the point where the odds for Brexit were an astonishing 9/1.”

UBS identifies 9 London stocks to benefit from Brexit - 12:50pm

The Swiss bank picked out a total of fifteen companies listed in the UK and Europe which it says are ‘Brexit winners’ but have yet to outperform the rest of the market.

It noted that these companies benefit from having a combination of lower UK sales exposure and the potential for a boost to profits due to the weaker British currency.

The ‘winners’ identified by UBS are as follows:

Sophos Group Plc (LON:SOPH), down 3.3% today at 173.2p.

Imagination Technologies Group Plc (LON:IMG), down 2.6% at 176p.

AstraZeneca Plc (LON:AZN), up 0.4% to 3,915p

Prudential Plc (LON:PRU), down 8.7% at 1,240p.

Arm Holdings Plc (LON:ARM), up 0.5% at 1,024p.

Vodafone Group (LON:VOD), down 3.67% at 209.9p.

Diageo Plc (LON:DGE), up 0.7% at 1,845p.

Centrica Plc (LON:CNA), down 5.45% at 206p.

Meggitt plc (LON:MGGT), down 4.2% at 379.9p.

Labour MPs call out leader Jeremy Corbyn - 12:40pm

Labour leader Jeremy Corbyn is facing a no confidence motion following the victory for the Leave campaign in the referendum.

Two MPs, Margaret Hodge and Ann Coffey, submitted the motion to the Parliamentary Labour Party  after swathes of its supporters in the North voted for Brexit.

Smith said Corbyn’s leadership during the campaign had been “insufficient”.

Brexit ‘not a game changer’ for commodities - 12:30pm

The drop in prices for industrial commodities like oil and copper - down 5% and 3% respectively this morning - are not expected to last, not according to Capital Economics.

Julian Jessop, Capital Economics head of commodities research, in a note said: “these moves are already starting to unwind.

“Once the dust has settled on the shock result, we suspect that the prospects for all these commodities will be determined by other, more specific factors.”

He added: “It was always likely that the negative impact of a Brexit vote on business and investor confidence would feed through into lower prices for riskier assets of all types, including industrial commodities.”

“We expect other factors to take over again as key drivers of industrial commodity prices soon.”

UK economy to be ‘main victim’ of Brexit, says Bank of America - 12:20pm

We think the crystallization of a major tail risk for markets is likely to herald a period of volatility as investors digest the full implications of Brexit,” analysts at Bank of America Merrill Lynch said in a note.

“Once the dust of the knee-jerk market reaction settles, we think that the UK's economy will clearly be the main victim, but also that the shock for the Euro area and the global economy is likely to be significant.”

“Policy responses will be needed beyond the 'first-aid' remedy market disruption normally requires."

Virtual currency Bitcoin rockets in value - 12:00pm

The value of controversial virtual currency Bitcoin rocketed on Friday as the UK voted to leave the European Union.

The decision shocked global markets, with the pound initially plummeting to a 30-year low, and one major beneficiary has been Bitcoin, which was almost 6% higher by late-morning to US$662.

“Bitcoin traders will welcome the news that the price of a single Bitcoin has surged to almost £500 ($660) following Britain’s vote to leave the European Union,” Tim Heath, chief executive of Bitcoin platform provider CoinGaming said.

The currency received a spike in popularity last year, when the possibility of a Grexit (Greece leaving the EU) left people unable to withdraw money.

British Airways profit warning on Brexit turbulence - 11:15am

International Consolidated Airlines Group (LON:IAG), itself a combination of two of Europe’s big flag-carriers, said the vote to leave the EU will hit operating profits.

In the run up to the UK referendum, the airline group saw a weaker than expected trading environment.

“Following the outcome of the referendum, and given current market volatility, while IAG continues to expect a significant increase in operating profit this year, it no longer expects to generate an absolute operating profit increase similar to 2015.”

IAG shares nosedived around 20% to 423p.

EasyJet Plc (LON:EZJ) and RyanAir Holdings Plc (LON:RYA) - both of which rely heavily on trans-European operations - dropped 17% and 12.5% respectively.

Market told to forget about IPOs - 11:05am

Ernst & Young’s UK IPO leader Scott McCubbin has said that there is likely to be no IPO activity in the next year, following the UK’s vote to leave to EU.

“IPO activity can be expected to largely cease in the next 12 months,” warned McCubbin.

“Increased uncertainty about the impact that the vote to Leave the EU will have on listing legislation, as well as the expected devaluation of the pound, is likely to hold activity back.”

North Sea oilers call for ‘smooth as possible’ transition - 11:00am

Offshore industry group Oil & Gas UK has said it respects the democratic decision and is ready to move forward. It added that it has maintained political neutrality throughout the referendum campaigning, and noted that its members would undoubtedly have their own views on EU membership.

In a statement, Oil & Gas UK said: “our role is to represent our members throughout the transition ahead.

“We hope that all those involved will now come together and work constructively to make this transition as smooth as possible and we ask that the UK Government clearly outlines the process which will follow to minimise any potential period of uncertainty.

“The UK oil and gas industry is at a critical juncture and we need to ensure the UK Continental Shelf continues to attract investment and be seen as a great place to do business.”

No comment was made regarding any speculated reprisal of the SNP's push for Scottish independence in the aftermath of the EU referendum.

Some 62% of Scots voted for Remain yesterday, and in 2014 the EU membership attached to staying in the United Kingdom was deemed to be a key factor in Scotland’s vote against independence.

Right place, right time for Randgold Resources - 10:46am

Charles Gibson, analyst at Edison Investment Research, in a note, highlighted that Britain’s domestic output is currently very limited, but, there are good reasons to buy mining shares.

He notes that for mining companies there is a ‘translation effect’ between earnings, denominated in US dollars, share prices that are quoted in sterling.

“A weak pound would increase the sterling value of dollar denominated earnings and provide a one-off perception of cheapness relative to other UK-quoted companies,” Gibson said.

“In this case, almost all UK-quoted mining companies can be seen as effective Brexit hedges.”

He highlighted Randgold Resources Limited (LON:RRS), London’s largest gold miner, which is up 17% presently, as a particular beneficiary of such circumstances.

“It’s probably not what management had in mind when they founded the company and set it on its path some twenty years ago, but yet again RRS appears to be in the right place at the right time to give investors the best chance of suffering the slings and arrows of outrageous fortune whilst generating a profit at the same time.”

As a producer of a ‘safe haven’ commodity like gold, Randgold is also attractive as a defensive play on the current volatility.

LSE & Deutsche Boerse deal is still on - 10:32am

The London Stock Exchange Group PLC (LON:LSE) and Deutsche Boerse AG (ETR:DB1) are “fully committed” to their proposed $30bln merger, despite today’s news that the UK is to leave the EU.

The stock exchanges said the result did not change the strategic reasoning behind the deal, and urged shareholders to approve it.

A Canadian tonic for traders? - 10:30am

After Friday morning’s stock bloodbath many a fund manager will be looking forward to a gin, but, Mark Carney – the Canadian in charge of the Bank of England – may have given market’s a little tonic.

Kathleen Brooks, research director at City Index, in a note, highlighted Carney’s earlier speech among ‘a few things that could have a soothing impact on battered markets’.

“Markets typically love it when a central bank says that it will do whatever it takes,” she said.

Brooks added: “Both Carney and Cameron were at pains to say that things won't change initially, although they can't guarantee there won't be change in the long term, Carney and co. have provided a much-needed tonic for the markets in their hour of need.

“Overall, this means low interest rates for a long, long time yet, and potentially more QE, and even multilateral intervention to stem another disorderly decline in the pound, should it be required.

“Central banks to the rescue once again.”

Stockbroker cautions investors against making knee-jerk decisions - 10:20am

“The coming days are likely to be choppy on the stock market as it digests the ramifications of Brexit, and further falls are possible,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

“However markets will bounce back at some point, and investors who switch to cash risk buying back into the market at a higher level, and ending up in a worse position than if they had just stayed put.”

Brexit volatility could last two years, wealth manager says - 10:05am

Nigel Green, chief executive of deVere group, described Britain’s pending divorce from the European Union as ‘a shock event’ and warned markets are now on a “magical mystery tour”.

“The Brexit victory is a victory for uncertainty across international financial markets.  Brexit-triggered volatility is now only just beginning; we can expect it to potentially last up to two years. 

 “Due the far-reaching impact of this vote, Brexit will inevitably affect the British and the European economies and the wider global financial markets.  The decision may have been taken in the UK but it will impact the rest of the world too.

 “Investors around the world on Friday will pile into safety and prompt a significant shift in global markets from risky assets to safe havens.

“The world’s currencies, equities and bonds are now on magical mystery tour - at least in the short-term.”

Tax expert predicts 'new reality' for business and consumers - 9:50am

“On the one hand, businesses will be faced with uncertainty, at least in the medium term, about the tax rules and regulations that apply to them,” said Chris Sanger, head of tax policy at 'big four' accountancy firm EY.

“Consumers, on the other, may find price increases following a weakening of the pound and potentially be exposed to tariffs.”

He added: “On the corporate tax side, a vote to Leave the EU opens up the option for the UK government to offer more state aid, which could support large infrastructure projects.

 In addition, the anti-tax avoidance directive, which passed through the EU parliament earlier this week, will no longer apply to the UK once the UK has exited.

“Although this will allow UK lawmakers more freedom, it is unlikely that the UK would choose to deviate far from it, given the country’s active role developing similar proposals within the OECD.”   

City voted 3-to-1 to Remain, most Londoners want to stay - 9:45am

Most of London voted to stay in the EU in yesterday’s referendum, with nearly 60% of the capital voting to remain.

In some areas, such as Lambeth and Hackney, that figure was closer to 80%.

Only five of the 33 London boroughs, Hillingdon, Sutton, Bexley, Barking & Dagenham and Havering, voted to leave.

In the City of London – the UK financial centre – 75% of the vote went in favour of Britain remaining in the EU.

A look at the regional divides - 9:44am

Elsewhere in the country, the Midlands had the highest percentage of people wanting to leave.

59.3% of those in the West Midlands voted to opt out of the EU, while in neighbouring East Midlands, 58.8% voted to leave.

Voters in the North West (53.7%), North East (58%) and Yorkshire (57.7%) were also strongly in favour of exiting the EU.

Moving down the country, the South East (51.8%), East (56.5%) and South West (52.6%) backed the leave campaign, as did Wales (52.5%).

The only regions of the UK not to vote leave were London (59.9%), Scotland (62%) and Northern Ireland (65.8%).

Talking about generations - 9:43am

Young people were strongly in favour of staying in the EU, with 75% of people aged between 18 and 24 voting to remain part of the European Union.

56% of those aged between 25 and 49 were also in favour of vote to remain.

Voters over the age of 50 were, as expected, much more likely to vote to leave the EU.

56% of those aged between 50 and 64 were in favour of leaving, while 61% of over-65s also wanted to break away from the European Union.

Over-65s only have to live with today’s decision for an average of 16 years, YouGov noted in recent research.

In contrast, the younger generation, those aged between 18-24, will have to live with Britain’s decision to leave for an average of 69 years.

Bank governor Carney says UK will adjust in time - 9:40am

Mark Carney, Bank of England governor, said that the UK economy “will adjust to new trading relationships that will be put in place over time”.

“The best contribution of the Bank of England to this process is to continue to pursue relentlessly our responsibilities for monetary and financial stability."

Carney added that Bank would make available £250bn of additional funding to stabilise markets if required.

Is anything going up? - 9:30am

Rangold Resources Limited (LON:RRL) up 15% to 7,445p

Acacia Mining Plc (LON:ACA) up 14% to 390p

Fresnillo Plc (LON:FRES) up 11.5% to 1,383p

Centamin PLC (LON:CEY) up 8.13% to 117.76p

Rolls Royce Plc (LON:RR.) up 3.27% to 665p

Gold price to remain extremely jumpy - 9:00am

“I have been in the markets for over thirty years and cannot really remember anything quite as volatile as the price movements we have just witnessed,” said David Govett, head of precious metals at Marex.

“Looking purely at gold, we saw buying come in from all quarters as the night progressed and the result veered further and further to the leave side.

“At one point the market was up $110 from it’s opening, which in the Asian time zone is a huge move.

“Where we go from now is difficult to estimate, but I think that with massive uncertainty now ahead of us, dips will be bought.

“Today will remain extremely jumpy and nervous with very exaggerated moves. Be very careful, I don’t think we have seen the last of this!”

Google searches for ‘buy gold’ soar more than 500% - 9:00am

As wealth managers sought a 'safe haven' internet searches for the phrase ‘buy gold’ spiked more than 500% as the referendum result started to become clear early this morning, said Google.

Gold price soars - 8:30am

The price of gold soared some 5% in London this morning, and just after 9am was changing hands at US$1,311 per ounce.

Prime Minister David Cameron resigns - 8:25am

Cameron said he would do everything he could to steady the ship in coming weeks but was not the person to take the captaincy and would aim to have a replacement by October.

Addressing crowds outside Downing Street, Cameron assured the world's financial institutions that Britain's economy was "fundamentally strong".

FTSE 100's early movers: Banks and builders tumble  - 8:15am

Banks and financial services

Barclays Plc (LON:BARC) down 25% to 139p

Lloyds Banking Group Plc (LON:LLOY) down 24% to 55p

Royal Bank of Scotland Group Plc (LON:RBS) down 25% to

Housebuilders and property

St. James's Place Plc (LON:STJ) down 22% to 716.6p

Travis Perkins Plc (LON:TPK) down 14% to 1,649p

Taylor Wimpey Plc (LON:TW. down 24% to 145p

Persimmon Plc (LON:PSN) down 21% to 1,646p

Barratt Developments Plc (LON:BDEV) down 21% to 454p.

London stocks crashed at the open - 8:00am

The FTSE 100 opened more than 8% lower, and after an hour of trading was down 315 points or 4.8%.


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