The FTSE 100, which is dominated by international companies that do much of their business outside the UK, has recovered from a 6 percent drop after the June 24 result of the EU referendum showed Britain had voted to quit the bloc.The Brexit result has hit sterling, sending the currency down to a 31-year low, yet that in turn has benefited the FTSE 100’s international companies, as a weaker pound can help exporters while companies get an accounting boost from revenues earned in U.S dollars.
“The economic fundamentals look weak, given the result of the EU vote, but the international exposure of the FTSE 100 has meant it has been pretty resilient,” said Central Markets’ trading analyst Joseph Neighbour.
“Nevertheless, there is still a lot of ‘short’ interest out there in the market when we look at our trading platforms,” added Neighbour, referring to ‘short’ positions betting on a future market fall.
Worries over Brexit hit FTSE 100 property and housebuilding stocks earlier this week, with leading fund managers such as Legal & General and Aberdeen Asset Management cutting the value of UK property funds.
Brexit has had more of an impact on the FTSE 250 mid-cap index than the FTSE 100, since the mid-cap index has more domestically focused companies exposed to any downturn in the British economy caused as a result of Brexit.
The slump in sterling has also meant the FTSE 100 is worth around 10 percent less than it was before the Brexit vote in terms of its U.S. dollar value.
Those Brexit concerns were underlined on Friday after market research company GfK said that Brexit had prompted the biggest drop in UK consumer morale in five years. Uncertainty about Britain’s future trade agreements with Europe after it leaves the bloc could also stifle foreign investment into the UK and curb job creation, economists say.
“With the horrible mix of Brexit anxieties, global growth fears and depressed oil prices weighing on global sentiment, stock markets could be exposed to further losses moving forward,” said FXTM research analyst Lukman Otunuga.