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The Accumulator: Boris' Brexit backing boost

The pound tumbled this week as 'Brexit' fears took hold following Boris Johnson's intervention, amplifying returns from overseas markets.

 

by Sam Antrobus on Feb 26, 2016 at 17:18

The Accumulator: Boris' Brexit backing boost

Investors counting their impressive returns from overseas stock markets this week have one man to thanks above others: Boris Johnson.

The London mayor’s backing of the ‘out’ campaign, just a day after prime minister David Cameron had announced the UK’s referendum on EU membership would take place on 23 June, galvanised those calling for a ‘Brexit’ and sparked a tumble in sterling.

The pound this week tumbled to a seven-year low against the dollar, while another landmark could be around the corner. Sterling has not fallen below $1.36 for 30 years, but at $1.386 is not far off.

As exclusive Accumulator data table shows, the three major global currencies featured all made substantial gains against the pound over the five days to yesterday. The yen rose 3.8%, the dollar was up 3% and the euro gained 2.4%.

While global markets have continued to recover from the worst of the sell-off that greeted the start of the year, sterling’s slide has helped to amplify those returns.

A 1.8% rise for the S&P 500 in dollar terms turned into a 4.9% boost in sterling and means that in pound terms, the US is now up over the year to date, joining Brazil and Russia, which have both enjoyed the bounce in the oil price, with crude 2.6% higher over the week.

The resurgence in oil and commodities more broadly has meanwhile hurt stock markets in oil-importing India and China. Globally, markets have made up much of the ground lost at the start of the year, with the FTSE World now just 0.8% down over 2016.

The pound’s plummet has even managed to turn losses for domestic investors in Europe and Japan into gains for those holding the same stocks in the UK. The MSCI Europe ex-UK index, the German DAX 30 and the Japanese Topix were both down in euro and yen terms over the week to yesterday, but sterling investors have enjoyed a positive return.

But Brexit fears have largely been confined to the currency markets, with the FTSE 100, although not matching the gains of overseas markets, still notching up a positive return for the week.

Gilts too, have resisted a slide into the red, as have UK corporate bonds, although sterling’s slide meant they could not match the jump in bonds from the US and Europe.

One sector that has suffered, however, is property, with UK real estate investment trusts (Reits) down 2.9% over the week. Reits have already been in the doldrums so far this year as oil’s slide has raised fears sovereign wealth funds won’t be snapping up properties at quite the same rate.

The prospect of a UK exit from the EU has further shaken investors, with pricey London property rated as particularly vulnerable in the event of a Brexit.

12 comments so far. Why not have your say?

In the Dark

Feb 26, 2016 at 17:50

Just what are you going on about. Linking Boris to the discounted value of the pound is nonsense. The Bank of England has been talking the pound down for weeks. A weaker pound makes our exports cheaper and increases the cost of foreign holidays.

Even the Chancellor was taking rubbish in his review from China today. In the short term... In the short term... In the short term... Yes Chancellor in the short term, so what?

An EU out vote is a vote for political freedom. Free from the Napoleonic instution that is the EU. The UK state serves the people, EU demands the people serve the state. OUT! OUT !OUT! we cry.

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Anonymous 1 needed this 'off the record'

Feb 26, 2016 at 23:33

There's none so blind as cannot see.

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Luichicornish

Feb 27, 2016 at 08:41

In the Dark,

Spot on my friend.

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John N Coles

Feb 27, 2016 at 11:05

Couldn't agree more, In The Dark.

A shallow, idiotic column by Sam Antrobus.

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Hotrod

Feb 27, 2016 at 12:02

I am struggling to see the logic behind this article too.

To my mind: If the exchange rate for Sterling is falling against other major currencies, then the fact that London real estate is priced in GBP would give foreign investors an advantage when they come to pay with their Dollars, Yen, etc.

I should have thought that with returns from oil stocks dwindling, the switch into property would be increasing not decreasing as the article suggests.

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Prof Eman

Feb 27, 2016 at 12:58

In the Dark, switch on onto the News, c/o BBC to-day.

UK EU exit would be a global economy shock.- G20 Leaders.

If it would be a global shock, what would it be to the UK?

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John N Coles

Feb 27, 2016 at 14:41

On the BBC News, Prof?

Who'd have thought it.

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croppp

Feb 28, 2016 at 09:58

EVEN THE MAGAZINE SELLER WENT HOME EARLY.

A new dawn is sweeping the uk .a country about to be returned to the brits.

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john_r

Feb 28, 2016 at 12:18

@ Prof Eman

Some economic advisors are now spelling a tick shaped recovery for the UK after Brexit where a shallow downturn during the first two year transitiional period gives way to a steady upturn as global opportunities materialise and are acted upon.

As the EU (not Europe) continues to dither instead of sobering up - it's now time to leave the Titanic.

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Sinic

Feb 28, 2016 at 12:22

We will only know whether the judgement of fear mongering 'in' brigade or the grandstanding rhetoric the 'out' brigade was correct in their utterances in about five years time.

The reality is that Cameron and Gove, Osborne and Johnson, Carney and King are all guessing! No one knows whether Brexit will ultimately lead the UK, or at least England, to a promised land of secure borders, a sustainable immigration policy, a growing economy and self government.

One inescapable fact is that the EU is politically and economically failing and the departure of the UK will only exacerbate that failure, which in turn will damage the UK. In or out ' we are doomed'!!

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croppp

Feb 28, 2016 at 14:33

One thing is certain the uk will not be able to step right out .with immediate effect too many nails and screws to undo .the prime minister will face a task .much candle burning for the goverment .but it will be worth it the pound will go to a new high.

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croppp

Feb 28, 2016 at 15:43

Around 53 commonwealth states are there for briton

this is waiting .some words to remind us

The commonwealth is a voluntary association of independent sovereign states.consulting and cooperating in the common interests of their peoples and in the promotion of international understanding and world peace .

Europe would have worked better if they had understood better.

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