Among the UK 100 ’s worst performers, following yet another political surprise, are sectors that our clients love to trade. With Conservative PM May set to remain in power has anything changed? Shares are already well off their worst levels implying calm returning. Was the sell-off overdone? Is there potential for further recovery? Are we staring at buying opportunities?

The sectors I am referring to are Banks, Housebuilders and Retail, all impacted by a perceived dent to investor sentiment from uncertainty about the UK economy and of course Brexit negotiations.

Banks (BARC -0.7%, LLOY -1.0%, RBS -3.0%) have been among hit hardest due to their exposure to UK economic activity and growth. Although we might have expected LLOY to underperform on account of its sizeable mortgage book and sensitivity to the UK housing sector, itself intricately linked to consumer confidence. Note also that said big banks were down as much as 5.5% in early trading so sentiment is already much improved.

At the other end of the banking spectrum, HSBC (+1.2%) and STAN (+2%) have been posting gains all day, understandable given their greater Asian exposure and thus insulation from UK political and economic risk. The smaller challenger banks (VM, MTRO, CYBG, ALD) are lower by 2% to 4% as they might find things even harder should the economy dip.

As for the Housebuilders, the prospect of uncertainty about whether people will still want to buy and sell houses has seen shares fall between 1.4% (PSN) and 2.5% (TW, BDEV). The standout underperformer is BKG (-3.2%) due to its greater exposure to London and fears of the government will still going after a hard Brexit that hurts the City. As we write, however, the aforementioned big guns are much better off than then were earlier (up to 6% offside), suggesting buyers have stepped in en masse. The likes of BWY and BVS are also merely flat to -0.5%, demonstrating solid resilience.

Last up is Retail, which couldn’t be more firmly attached to the hip of consumer confidence. Hence the likes of NXT and MKS under water to the tune of 2% to 2.5%. However, this is also much improved on their lows of the day, when they were registering losses of nearly 4%. Is the recovery already under way? Can the shares close today’s gap and continue their recovery north?

My reason for pointing all this out is that it has all the hallmarks of the reaction to the Brexit referendum last June, albeit of a smaller magnitude and in accelerated form. Firstly, the initial knee-jerk lower. Then  strong bargaining hunting. This makes me wonder whether the reaction was once again overdone and that the recovery trend has legs. Twist again, like we did last summer?

After all, what’s changed? PM May – more pro-business than Corbyn – is still at the helm, even if this is now as leader of a coalition. Brexit negotiations are still scheduled to start on the 19^th. May’s hand might not be as strong as it was, or she hoped it would be, but she still has the same mandate. The economy is in the same state it was yesterday. And the UK Index is still just 1.2% from recent record highs.

To keep abreast of UK Index buying opportunities and the political goings on impacting the financial markets get permanent access to our research. Couple this with our excellent traders for tailored market updates and you’ll soon realise why we were recently voted Best CFD Research Service and have retained the Best CFD Provider title for a ninth straight year.

As always, enjoy your weekend,

Mike van Dulken, Head of Research, 9 Jun 2017