Financial market research and analysis

The FTSE 100 stocks shred 200 points on Friday as the UK decided to leave the European Union. Taylor Wimpey, (-29.20%), Persimmon (-27.55%) and Barratt Developments (-23.84%) lead losses in London, followed by financials: Lloyds (-21.00%), RBS (-18.04%) and Barclays (-17.68%). The selling pressures continued with the weekly opening bell as the political atmosphere has turned sour after a weekend of discomfort across the United Kingdom. More Labour MPs are expected to depart following the ‘Leave’ win.

Top gainers were Randgold Resources (+14.18%) and Fresnillo (+11.86%) as gold rallied past $1355 on Friday. More upside potential is seen in gold miners as the Brexit vote has paved the way towards looser monetary policies across Europe and the UK. Gold could see a further rise toward the $1380 / $1400 zone on a sweet combination of global risk aversion and low rate environment.

Although the US dollar is stronger against all of its G10 counterparts - except the yen, the softer Fed expectations should reverse the bullish tendency in the USD sooner rather than later. The expectations of a Fed interest rate hike in 2016 slumped to 15% from 50% pre-Brexit.

The yen gained 0.33% in Tokyo despite the Bank of Japan’s warnings of a potential intervention to halt the undesired appreciation of its currency. Nevertheless, the risk aversion could continue pressuring the USDJPY for a potential slide below the 100 level again.

Back to the UK, the hotel and travel stocks are under a decent selling pressure due to the rising uncertainties after the Brexit vote.

Many broker downgrades in homebuilders, financials, travel and leisure stocks came through at the start of the week and are expected to reinforce the selling pressures at the heart of the FTSE stocks. The FTSE 350 should continue underperforming the FTSE 100 as small, medium sized companies have a narrower manoeuvre margin in terms of replacing their European business partners by alternatives deals overseas. Therefore, the Brexit should weigh heavier on small companies’ shoulders, as big business have certainly in place a solid plan B, in order to go beyond the borders to strengthen their non-EU relationships.

The pound extended losses against the US dollar (-1.72%); the pair trades at 31-year lows. The bias in the sterling and the FTSE remains comfortably negative despite oversold market conditions. Upside attempts are expected to remain capped.