Not quite the result the markets expected!

There we have it – The UK voted ‘Leave’. This was neither the simplest nor the most desirable outcome as far as market uncertainty is concerned, but the decision has been made! It’s now to two years of negotiations between the new UK prime minister and the EU powers that be in Brussels to forge a new relationship. However, the markets won’t hang around until that’s done and dusted. They will move on.

So it’s time to move onwards and, well, upwards. Pre-vote, the GBP arguably performed better than expected against the USD, while US stock markets flirted with record highs once more thanks to a weaker Dollar and diminished expectations of a forthcoming Fed interest rate hike. The UK 100 rallied on Thursday 23 June. What then are we to expect now that the UK has chosen the indirectly labelled path of most uncertainty?!

 GBP/USD

The Pound Sterling went to 30-year lows against the US Dollar overnight on 23 June, yet has since retraced those losses to trade at Feb 2016 levels. Was the initial selloff an overreaction and has Cameron’s resignation re-ignited market confidence? Or are we simply looking at a dead cat bounce?

The UK 100 Index

The UK’s UK 100 Index fell 600pts in futures trading overnight, yet it retreated no further than Feb 2016 levels before retracing the down move to trade back above 6000! This is all contrary to the prevailing expectations and flies in the face of a negative campaign by Cameron and Osborne. Markets are down and yes, the Pound could fall further. The Index could do the same, but such significant retracements are certainly not indicative of a market in freefall today. Look out for a relief rally.

Set to benefit?

If markets continue to fall, we expect safe havens to receive a boost – obvious perhaps – and thus precious metals miners could make for some good plays on increased demand in that sphere. It’s time also to consider the big, boring non-cyclical stocks – such as Tobacco, Pharmaceuticals and Paper/packaging -  as stores of wealth and sources of income. Increased demand for these stocks could also make for some attractive share price gains, so there’s something for everyone.

Game over for the banks, house builders and airlines?

Note that, while Financials, Property and Travel stocks may well continue to suffer in the immediate aftermath of the vote, remember that we’re a long way off a done deal. Thus, as details of the negotiations on the UK’s exit from the EU emerge, as well as any new trade arrangements, markets will adjust accordingly. Who knows what could happen – some new deal to keep us IN the EU may even be struck. That’s why it’s really important for you as an investor to keep your ears to the ground. Or, you could let us do it for you by accessing our free, no nonsense daily research and market commentary here. In any case, read on for our top 6 Brexit stock picks.

Randgold Resources (RRS)

• Shares are testing the 2012 high point having made a 3-year bullish triple bottom reversal
• Rising support gained at a 2.5-year trend line
• Note volumes decreasing through 2016
• Shares in Gold miners tend to move more than the Gold price itself
• RRS currently has a dividend yield of 0.75%

Broker Consensus: 19% Buy, 67% Hold, 14% Sell

Bullish: CIBC World Markets, Sector Outperform, Target 7250p, -4% (15 Jan)

Average Target: 6151p, -18% (24 June)

Bearish: Mirabaud Securities, Sell, Target 4900p, -35% (31 March)

N.B. All pricing and consensus data was sourced from Bloomberg on 24 June. Brokers are sure to update their recommendations in light of the current situation. Please contact us for a full, up to date rundown.

Fresnillo (FRES)

• Fresnillo shares are testing the Sept 2013 high point
• Still 10% upside to completion of the June bullish flag pattern
• Volumes solid through June
• Stochastic oscillator returning from overbought
• FRES currently has a dividend yield of 0.72%

Broker Consensus: 13% Buy, 47% Hold, 40% Sell

Bullish: HSBC, Buy, Target 1250p, -10% (25 Apr)

Average Target: 970p, -30% (24 June)

Bearish: Goldman Sachs, Sell/Attractive, Target 750p, -46% (31 March)

N.B. All pricing and consensus data was sourced from Bloomberg on 24 June. Brokers are sure to update their recommendations in light of the current situation. Please contact us for a full, up to date rundown.

Compass Group (CPG)

• Compass Group shares are at resistance in a 2.5yr rising channel
• Volumes rising through April, May and June
• Support at the 100-day moving average
• Momentum & RSI diverging with price since Nov 2015
• CPG currently has a dividend yield of 2.5%

Broker Consensus: 31% Buy, 58% Hold, 11% Sell

Bullish: Credit Suisse, Outperform, Target 1575, +20% (24 June)

Average Target: 1318p, +0.6% (24 June)

Bearish: Numis, Hold, Target 1150p, -12% (11 May)

N.B. All pricing and consensus data was sourced from Bloomberg on 24 June. Brokers are sure to update their recommendations in light of the current situation. Please contact us for a full, up to date rundown.

British American Tobacco (BATS)

• Bullish flag pattern suggests potential for further upside
• Volumes rising through May and June
• RSI still bullish
• Stochastic oscillator overbought
• BATS currently has a dividend yield of 3.6%

Broker Consensus: 52% Buy, 33% Hold, 15% Sell

Bullish: Jefferies, Buy, Target 4800, +13% (26 Apr)

Average Target: 4333p, +2% (24 June)

Bearish: RBC Capital Markets, Underperform, Target 3400p, -20% (6 June)

N.B. All pricing and consensus data was sourced from Bloomberg on 24 June. Brokers are sure to update their recommendations in light of the current situation. Please contact us for a full, up to date rundown.

Diageo (DGE)

• Rising lows since Aug 2015
• MACD made a bullish cross
• RSI broke out above falling highs
• Momentum still negative
• Volume pulling back having made 10-month highs
• DGE currently has a dividend yield of 3.1%

Broker Consensus: 58% Buy, 32% Hold, 10% Sell

Bullish: Berenberg, Buy, Target 2350p, +28% (21 Jun)

Average Target: 2054p, +12% (24 June)

Bearish: Canaccord Genuity, Sell, Target 1660p, -9% (28 Jan)

N.B. All pricing and consensus data was sourced from Bloomberg on 24 June. Brokers are sure to update their recommendations in light of the current situation. Please contact us for a full, up to date rundown.

Burberry (BRBY)

• Favourable exposure to UK market in current climate
• Second test of 2016 low 1037p could be a double bottom reversal with upside potential towards 1900p
• Comfortably outperforming the UK 100 index on 24 June
• Resistance at the 50-day moving average
• RSI broke out above 3-month resistance
• BRBY currently has a dividend yield of 3.3%

Broker Consensus: 21% Buy, 65% Hold, 14% Sell

Bullish: Equita, Buy, Target 1554p, +40% (16 May)

Average Target: 1271p, +14% (24 June)

Bearish: Liberum, Sell, Target 925p, -17% (1 Jun)

N.B. All pricing and consensus data was sourced from Bloomberg on 24 June. Brokers are sure to update their recommendations in light of the current situation. Please contact us for a full, up to date rundown.

Want to know more?

By the time you read this the share prices of the above companies will have moved. That’s why it’s so important you get the information you need when it’s fresh and ideally before the wider market stops reacting. Why not open a demo trading account and have a look at the most recent price data for the above companies – where did shares go based on the factors discussed? If you’ve seen something interesting and would like to discuss it, give us a call and speak to one of our friendly team of traders. We’re always delighted to engage in interesting, thought provoking conversations about the markets.

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