Brexit – the sectors of the stock market most affected by the decision.

Brexit has sparked the biggest two-day fall for global equities on record, with around $3 trillion wiped off the value of stocks in just two days of trading. Tuesday, June 28th, saw a rally in equities as markets clawed back some ground, but sentiment in several sectors remain bearish.

Brexit_EU_referendum_trading

Banks

 

Banks have borne the brunt of short selling, with FTSE 100 stocks RBS, Barclays, HSBC and Standard all falling since Friday.

First, there is a realisation that interest rates will remain low for longer – gilts have sunk below 1% for their first time ever and the Bank of England is thought to be mulling a cut to rates. Negative rates are even being discussed.

Meanwhile, property assets will have to be revalued and that could severely dent banks’ loan books.

Thirdly, British banks probably won’t have access to EU markets post-Brexit as they’ll lose their passporting privileges. This could seriously impact banks’ footprints and UK operations. JPMorgan could move 5,000 jobs out of London, while HSBC has already indicated it could relocate 1,000 staff to Paris.

Improved capitalisation post-Lehmans means we’re not seeing a run on bank stocks but there are clearly concerns about how UK banks can prosper outside the EU.

Anthony Brown, CEO of the British Bankers’ Association, says it will take “several years” to resolve any changes to banking.

“A significant amount of contingency planning has already been undertaken and the industry is very well prepared, and have increased capital and liquidity. Banks will now assess what the result means for their customers and staff in the long term,” he said.

Travel

 

Some travel stocks have taken a hit, notably EasyJet and Carnival, the cruise ship operator. Investors are worried that Brexit will put a dampener on holiday plans and business travel. A weak pound makes it pricier for Brits to go to Europe. But there are reports of big interest in trips to Britain from the US, which could help some stocks. Airlines are exposed as the vote casts doubt on the future of Britain’s participation in Open Skies and the EU’s single aviation area – schemes that allow carriers to fly freely between European nations and the US.

Property

 

Property stocks are highly exposed and the freefall in some companies since the Brexit vote was widely anticipated.

Falling GDP and investment will be bad for commercial property as office space will be in less demand. Estate agents are also very worried that house prices could slump as confidence is shaken, jobs go and lending dries up.

Melanie Leech, chief executive of the British Property Federation, commented: "The effect of the result has been immediate, and we are already seeing market turbulence and a fall in the pound. The priority for the government and the Bank of England must now be to stabilise the position and maintain confidence in the UK. 

"It is now clear that there will be political changes ahead, but we will continue to work in partnership with government and other stakeholders so that the real estate industry, which is a considerable contributor to UK GDP, can continue to support the economy and create great places.