London midday: Stocks rally on bargain hunting post-Brexit

London stocks rallied on Wednesday as investors took advantage of bargains following Britain’s decision to leave the European Union.

Banks and brokers, which were hardest hit following’s Friday’s EU referendum, clawed back ground as investors don’t expect the government to invoke Article 50 of the 2007 Treaty of Lisbon any time soon.

Prime Minster David Cameron has said he will not trigger Article 50, which formally starts the process of Britain’s exit from the EU, with his successor to decide whether to go ahead with Brexit. The new leader of the Conservatives is expected to be in place by 9 September.

“A disconnect is appearing between the pessimistic mood that is permeating the media and the insatiable optimism that seems to be driving yet another day of gains in the FTSE100,” said IG market analyst Joshua Mahoney.

“For many, the widespread selling that dominated the financial markets in the immediate wake of Friday’s referendum result was expected to persist, providing one of the deepest corrections for years. However, there is a confidence within the City that perhaps the implications to this vote may not be as immediate nor far reaching as many initially thought, providing opportunities for bargain hunters to grab shares at a discount.”

The pound also regained strength, rising 0.51% against the dollar at $1.3412.

At the same time oil prices gained on looming strikes by Norwegian oil and gas workers, which could help ease the global supply glut. Brent crude rose 1.18% to $49.16 per barrel and West Texas Intermediate jumped 1.2% to $48.46 per barrel.

On the economic data front, the eurozone’s headline economic sentiment measure dropped to 104.4 in June, from 104.6 in May. Analysts had forecast a reading of 104.7.

German consumer sentiment is set to improve next month but uncertainty following the UK’s decision to leave the European Union could take its toll, according to data from market research group GfK. Its forward-looking consumer sentiment indicator rose to 10.1 going into July from 9.8, beating expectations for it to remain unchanged.

European Central Bank President Mario Draghi reportedly told EU leaders on Tuesday that Britain’s decision to leave the EU could reduce eurozone growth by a cumulative 0.3 to 0.5% compared to previous estimates over the next three years.

In the UK, house prices rose 0.2% in June compared to a month ago, Nationwide said. It marked the same rate of growth as the previous month and was better than the 0% expected by analysts.

Still to come, US personal consumption expenditure figures at 1330 BST, US pending home sales at 1500 BST and the Department of Energy’s US weekly crude oil inventories data at 1530 BST.

In company news, shares in Dixons Carphone fell as it reported full year revenue that missed analysts’ expectations.

Travel and leisure stocks declined, including TUI, IAG and easyJet, after a gun and bomb attack on Istanbul's Ataturk international airport killed 36 people.

McCarthy & Sons slumped as the retirement homebuilder said the UK's exit from the EU may have an impact on the timing and cost of the conversion of its order book of reservations into completions.

Shawbrook Group jumped as Credit Suisse maintained ‘outperform’ rating but cut its target price to 235p from 380p. “We acknowledge the macro risks from Brexit (which we now reflect in estimates),and are disappointed by yesterday's announcement about past "irregularities" in asset finance lending, but believe underwriting is fundamentally robust and that current depressed valuations are overdone,” said Credit Suisse.

Prudential rallied after Barclays reiterated an ‘overweight’ rating and target price of 1609p on the stock, saying the company is its “top pick among European insurers”. Former head of the civil service Lord Turnbull, who served as a non-executive director at Prudential for almost a decade, said on Tuesday that British-based insurers may be better off outside the EU because capital rules have damaged competitiveness and constrained the sector's ability to expand. His remarks also gave peers Aviva and Legal & General a boost.

Market Movers

FTSE 100 (UKX) 6,284.20 2.34%
FTSE 250 (MCX) 15,766.67 1.70%
techMARK (TASX) 3,111.90 1.99%

FTSE 100 - Risers

Prudential (PRU) 1,263.50p 6.13%
Anglo American (AAL) 683.80p 6.03%
ITV (ITV) 173.70p 4.64%
Persimmon (PSN) 1,403.00p 4.39%
Burberry Group (BRBY) 1,148.00p 4.36%
Aviva (AV.) 381.80p 4.32%
Marks & Spencer Group (MKS) 313.70p 4.08%
Merlin Entertainments (MERL) 431.30p 3.93%
Legal & General Group (LGEN) 184.80p 3.82%
Shire Plc (SHP) 4,405.00p 3.79%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 844.00p -3.87%
International Consolidated Airlines Group SA (CDI) (IAG) 350.10p -1.99%
Dixons Carphone (DC.) 336.60p -1.58%
easyJet (EZJ) 1,058.00p -1.03%
GKN (GKN) 256.50p -0.85%
Paddy Power Betfair (PPB) 7,930.00p -0.75%
Randgold Resources Ltd. (RRS) 7,925.00p -0.50%
Johnson Matthey (JMAT) 2,784.00p -0.14%
Carnival (CCL) 3,266.00p 0.21%
WPP (WPP) 1,527.00p 0.33%

FTSE 250 - Risers

Shawbrook Group (SHAW) 170.00p 21.43%
OneSavings Bank (OSB) 195.00p 8.45%
AO World (AO.) 145.10p 7.48%
Ted Baker (TED) 2,348.00p 7.17%
Redrow (RDW) 321.90p 7.12%
Cairn Energy (CNE) 201.00p 6.91%
Countryside Properties (CSP) 201.90p 6.83%
International Personal Finance (IPF) 268.90p 6.71%
TR Property Inv Trust (TRY) 282.60p 6.64%
Weir Group (WEIR) 1,367.00p 6.46%

FTSE 250 - Fallers

Electrocomponents (ECM) 252.00p -3.52%
QinetiQ Group (QQ.) 215.60p -3.36%
McCarthy & Stone (MCS) 163.10p -2.51%
Paragon Group Of Companies (PAG) 241.40p -2.27%
Crest Nicholson Holdings (CRST) 336.00p -2.13%
Domino's Pizza Group (DOM) 316.70p -2.07%
DFS Furniture (DFS) 209.00p -1.88%
Halfords Group (HFD) 313.90p -1.81%
Ladbrokes (LAD) 109.00p -1.80%
Countrywide (CWD) 245.90p -1.64%