The UK housebuilders are topping the UK 100 again, putting in another floor on their Brexit recovery rally. This comes  thanks to a helpful trio of drivers including, 1) reduced political uncertainty regarding the next UK leader, 2) optimism that the UK central bank will ride to the rescue of the nation’s precious property market, and, 3) a healthy dollop of momentum driven bargain-hunting as the UK Index technically enters bull market territory.

1. News that the highly experienced, well-respected and no-nonsense Home Secretary Theresa May was the only candidate left standing in the Tory leadership race and set to inherit 10 Downing St by mid-week has assuaged market fears by avoiding a long and rudderless summer. Markets also like the fact that the PM in waiting maintains she will not invoke Article 50 UK-EU divorce proceedings until at least year-end, and not until better deals have been secured for the UK, tactically appealing to both the Remain and Leave camps.
2. Investors also appear to be betting big on Bank of England (BoE) Governor Carney delivering on post-Brexit hints by riding to the rescue of the UK’s precious property market (and economy) with well-flagged monetary stimulus boost (rate cut and/or more QE, maybe even something else like Funding for Lending 2.0) to offset referendum-inspired economic and financial uncertainty.
3. The UK Index back testing 6700 amid a 17% recovery rally (and technically back in bull market territory with gains of >20% from Feb lows) is also fuelling optimism that a recent breakout at 6430 has legs to usher us back towards 2015 all-time highs of 7100 via a 2-week bullish flag and, perhaps more significantly, an 11-month bullish inverse head & shoulders reversal (both highlighted below).

Mike van Dulken, Head of Research, 12 July