Weaker property stocks halt FTSE’s post-Brexit recovery

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LONDON: Britain’s top shares index fell on Monday, as weaker property and housebuilding stocks weighed on the market and halted its rebound from a slump caused by the UK’s decision to leave the European Union.

The blue-chip FTSE 100 index which had risen in the four previous sessions, was down 0.4 percent at 6,551.92 points.

Property stocks British Land and Land Securities were the worst performers, down 7.2 percent and 6.3 percent respectively, while housebuilders Persimmon and Taylor Wimpey also fell.

That sector was hit as data on Monday showed Britain’s construction industry suffered its worst contraction in seven years in June as concerns over Britain’s vote on quitting the EU intensified.

“Although short term stock market gains may be realised as expectations inflate over central bank intervention, the key fundamentals and ongoing concerns which have punished global stocks still remain intact in the background,” said FXTM research analyst Lukman Otunuga.

The FTSE 100 initially fell around 6 percent after the result on June 24 showed that Britain had voted to quit the EU, a result which pummelled sterling on currency markets.

The FTSE recovered last week, helped by expectations of more central bank help to stabilise markets after the result.

It has also been aided by the fact that a weaker sterling can help the FTSE’s international companies, since a weaker pound can help British companies export overseas.

Nevertheless, several analysts remained cautious over the market outlook, given the risks generated by Brexit, with the British economy expected to weaken as a result of it.

While the FTSE 100 has recovered since June 24, the index remains down by around 10 percent in US dollar terms since the vote, as the slump in sterling has reduced the value of the UK market in dollar terms.

“At the moment, we have seen selling at these levels, reducing exposure into any rallies that present themselves such as the recent move higher in GlaxoSmithKline. Many are opting to sit in cash, waiting for a market pull back,” said Lewis Jones, stockbroker at Cornhill Capital.

-Reuters