One week after the UK made the momentous decision to leave the EU, and it’s fair to say no one could have predicted that the UK 100 , having tanked by 10% last Friday morning, would post a week-long 15% rally. That’s 850 points. One long CFD contract on the UK 100 at £10/point, if held since 24 June, would now be showing a profit of up to £8,500. Sound good for a week’s work?

Does your current broker understand what’s going on?

While the outlook for the UK economy has soured which has hit the mid-caps in the , the weak GBP has attracted growth seeking investors to the many blue chip stocks that transact in USD. Since the USD is strong compared to the Pound, this means those companies’ profits are set to be magnified by the favourable exchange rate – you currently get more pounds for your dollars. That’s why the big dividend payers – oil majors like Royal Dutch Shell (RDSb) and multinational defensive stocks like Diageo (DGE) and British American Tobacco (BATS) – have outperformed. This ‘Brexit effect’ could well continue to drive demand for the UK’s blue chips.

How economic stimulus could boost the bull market

What’s more, with the Bank of England promising economic intervention to soften the blow of Brexit over the coming couple of months, GBP could be set to weaken even further. The rally many have dismissed as a dead cat bounce could have some serious legs yet and, as risk sentiment improves, we could well see capital piling back in to the classic risk plays – especially now that investors know the Bank of England has got their back. I want to highlight the financials in this sense. Together with the house builders, Barclays (BARC), Lloyds (LLOY) and RBS (RBS) bore the brunt of the Brexit sell off. But as ever, the central bank has stepped in with a reduction in capital requirements that will in essence loosen the financial shackles and allow the banks to do more business, take more risk and ultimately go for higher profits.

Don’t be left behind

We’ve seen an amazing 15%+ recovery rally in the UK 100 index. This morning our analysts noted a technical pattern on the index indicating potential for 700pts of further upside. That would take the index back above 7000! A potentially massive earner for our clients. Suffice to say they had that information pretty quickly this morning and are now primed to take advantage if and when that happens. The banks are up off their lows – next time we see something as exciting on the banks we’ll be sure to let you know. Simply click here to access our research. Simples!

Have a great weekend, and we look forward to having you on board next week.

James Abbott, Senior Trader (1 July)