Fresnillo (FRES), the safehaven equity play and silver miner,  is topping the UK 100 this morning as the UK flagship index tries to close the week on an equally positive note to last Friday’s post-Brexit vote rebound. This as silver outperforms its yellow metal cousin with a breakout amid continued bias for safer assets. The UK blue-chips as an aggregate may be trading levels last seen in August 2015 but we note Brexit-inspired uncertainty having delivered the index to where it stands. Investors are still opting for high-yielding defensives and consumer staples (pharma, tobacco, beverages, utilities, telecoms), precious metal miners and those set for a currency translation benefit via a weaker GBP (e.g. Oil majors, also benefiting from barrel prices holding around $50).

Markets love the idea of more stimulus from any major central bank right now (ECB, BoE, BoJ), but they especially like the idea that any resulting currency weakness, such as were are seeing in the GBP, keeps the USD strong and fends off any US Fed rate hike for even longer. Yay! Low rates for longer! And a weaker GBP means yesterday’s UK 100 breakout is understandable with two thirds of profits being generated outside the UK. It also explains why the more UK-focused UK Index 20 (55% of profits from UK) is trailing its bigger brother (-6.6% YTD vs UK 100 +4.6%).

It’s not exactly a risk-on rally. Banks, Property, Airlines and Consumer reliant names are still out in the cold. The much loved miners are well off the pace. And Carney was clear that intervention will be required this summer to offset the economic impact of Brexit uncertainty. Some appetite for risk may be creeping back in, but it is tepid and on the whole safety still rules.

Mike van Dulken, Head of Research, 1 July