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London open: Stocks rise as investors get to grips with Brexit
UK equities rose on Wednesday as investors came to terms with the reality of Brexit.
Prime Minster David Cameron has said he will not invoke Article 50 of the 2007 Treaty of Lisbon that starts formally the process of Britain’s exit from the EU. The next Prime Minister who takes over from Cameron in September will need to decide whether to trigger Article 50. Boris Johnson and Theresa May are seen as likely contenders for Prime Minister while Jeremy Hunt, Stephen Crabb and Nicky Morgan have said they would consider running for the top job.
“With no likelihood of Article 50 of the Lisbon Treaty getting triggered any time soon it seems that the status quo isn’t likely to change in the short – term, with an emergency EU Summit scheduled in September being pencilled in for a new UK Prime Minister to submit plans for next steps,” said Michael Hewson, chief market analyst at CMC Markets UK.
“Whilst that doesn’t remove the uncertainty with respect to the eventual outcome it also means that markets are going to have plenty of time to settle into their new found reality and equilibrium, as the extra time allotted could well see cooler heads prevail as some of the temperature is taken out of what still remains quite a tense situation.”
The pound also continued to regain strength against the dollar, rising 0.39% to $1.3396.
At the same time oil prices gained on looming strikes by Norwegian oil and gas workers, which could help ease the global supply glut. Brent crude rose 1.01% to $49.08 per barrel and West Texas Intermediate jumped 1.19% to $48.43 per barrel.
On the economic data front, UK house prices rose 0.2% in June compared to a month ago, Nationwide said. It marked the same rate of growth as the previous month and was better than the 0% expected by analysts.
German consumer sentiment is set to improve next month but uncertainty following the UK’s decision to leave the European Union could take its toll, according to data from market research group GfK. Its forward-looking consumer sentiment indicator rose to 10.1 going into July from 9.8, beating expectations for it to remain unchanged.
Still to come, US personal consumption expenditure figures at 1330 BST, US pending home sales at 1500 BST and the Department of Energy’s US weekly crude oil inventories data at 1530 BST.
In company news, shares in Dixons Carphone fell even as the company reported a 17% increase in full year profit and said it was optimistic of its chances post-Brexit as the largest player in the UK market. The group also announced its expansion in the US in a joint venture with Sprint mobile network.
Maintenance group Homeserve advanced as it said it was “well positioned” to meet the challenges posed by Britain’s exit from the EU, adding that growth prospects remained “strong”.
Pub group Greene King edged slightly higher as it reported a surge in full-year profit and revenue, partly thanks to its acquisition of Spirit Pub Company, but cautioned that Brexit was likely to hit consumer confidence in the near term.
Travel and leisure stocks declined, including TUI, IAG and easyJet, after a gun and bomb attack on Istanbul’s Ataturk international airport killed 36 people.
