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Audience

Equities

09:00 1 July, 2016

Equities: One week on from the Brexit vote

The mood in stockmarkets remains uncertain a week after the British vote to leave the European Union, but trading has settled down after the extreme volatility seen in the immediate aftermath of the referendum result.

Market sentiment towards what implications ‘Brexit’ will ultimately have for companies generally improved during the week after the vote. Some stockmarkets have recovered from the sharp declines in values that immediately followed the result.

Most notably, the FTSE 100 Index of the largest UK-listed companies rose by 7% in the week ending 1 July – one of its largest weekly gains in years. This rebound was led by the FTSE 100’s large global companies, who have diversified revenue streams from around the world and are arguably better placed to cope with any weakening in the UK economy than more UK-focused smaller companies that comprise the FTSE 250 Index.

International companies based in the UK also stand to benefit from a weaker UK pound, which has fallen considerably against both the US dollar and euro, in two ways: firstly, British goods and services will be cheaper to buyers in stronger currencies, promoting exports; and secondly, overseas revenues will be worth more in UK pounds when converted.

The general recovery in the FTSE 100 has been in marked contrast to the share price performance of UK and European banks, which have been significantly downgraded since the Brexit vote. British retailers, house builders and property companies have also been hit, given their dependence on the domestic economy, which many economists have predicted will be negatively affected by leaving the EU.

We continue to monitor stockmarkets closely, looking for value opportunities amid the volatility that has followed the referendum.

The views expressed in this section should not be taken as a recommendation, advice or forecast. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser.

Please refer to the glossary for an explanation of the investment terms used throughout this section.

 

09:00AM 28 June 2016

Fund update – Equities: M&G Global Basics Fund

Managers of M&G’s Global Basics Fund believe there has been indiscriminate selling across international stockmarkets following the UK’s vote to leave the European Union (EU). Indeed, the MSCI World index – a benchmark measure of share performance from across major markets – was down 5.9% on 27 June compared to 23 June, the day of the referendum.

Read more

13:00PM 24 June 2016


Past performance is not a guide to future performance.

 

12:30PM 24 June 2016


Past performance is not a guide to future performance.

 

11:30AM 24 June 2016

Equities: stockmarkets open down

Shockwaves from the UK’s public vote to leave the European Union (EU) reverberated in Asian markets overnight, as investors fled towards assets traditionally seen to carry lower investment risk, including gold and the Japanese yen. This shift has continued in the UK and European stockmarkets.

The FTSE All-Share Index, which reflects the performance of UK-listed company shares, was down by about 8% in the first 30 minutes of trading on Friday 24 June. The Eurostoxx 600 index, which reflects European listed company shares, likewise opened down around 5.5%.

The shares of financial sector companies and housebuilders were hit particularly hard in early stockmarket trading. Additionally, the trading of some European company stocks was temporarily suspended in the morning after the referendum result.

New political and economic uncertainties following the ‘Leave’ vote could result in investors having to pay higher prices – and accept lower prospective returns – for lower risk assets.

The value of investments and the income from them will fluctuate. This will cause the fund price to fall as well as rise. There is no guarantee the fund objective will be achieved and you may not get back the original amount you invested.

Please refer to the glossary for an explanation of the investment terms used throughout this section.

Past performance is not a guide to future performance.

 

7:00AM 24 June 2016

First views on overnight market reaction from the M&G Investment teams

The biggest reaction has been in sterling, which has fallen 10% overnight against the dollar. There has been a predictable flight to safe haven currencies including the yen and swiss franc.

We won’t know until US markets open but the early indications from the overnight US Treasury bond market and Asian markets is that this is primarily a UK and European issue: yield on US 10Y treasuries has fallen 25bp which is similar to movements seen in February - a fall but not over dramatic.

European and UK markets are not yet open but we expect European equities to fall approximately 5-10%. German government bonds to rally and peripheral European bond spreads to widen. The Financials sector is likely to be hardest hit.

More fundamentally, it is too early to tell the impact on the UK and European economies because everything depends on the terms of the relationship the UK and Europe negotiate. It will be a long time before we know what leaving the EU means – the possibility of a general election can’t be ruled out, or even an EU constitutional summit to offer the UK alternative terms.

What is more important than where we are at the end of today is where we are in a month or a year’s time.

The value of investments and the income from them will fluctuate. This will cause the fund price to fall as well as rise. There is no guarantee the fund objective will be achieved and you may not get back the original amount you invested.

Please refer to the glossary for an explanation of the investment terms used throughout this section.

The views expressed in this section should not be taken as a recommendation, advice or forecast. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser.

Past performance is not a guide to future performance.