The FTSE 100 leapt a massive 3.56% on Monday as relieved stock markets celebrated new polls suggested the Remain campaign would triumph and keep us in the EU. Markets fear the uncertainty an exit would bring and were rattled by last week’s polls suggesting the leave campaign was in command.
Too close to call
One thing I found particularly fascinating was looking at which stocks rose fastest on the news. This is a pointer to what will happen on Friday, when the Brexit verdict is in. The polls have swung back in favour of remain but the result is too close to call and if leave prevails then Monday’s leading risers are almost certain to lead Friday’s fallers, so watch out.
On Monday, the UK’s largest IFA Hargreaves Lansdown (LSE: HL) saw its share price soar a massive 7.81%, double the gain across the index as a whole, making it the biggest winner on the day. Most analysts agree the stock markets will plunge on Friday if Britain votes to leave the EU and that’s generally considered to be bad news for Hargreaves, as its fund advisory business is effectively a geared play on the market. If you want to take a punt on remain, it may be worth buying Hargreaves Lansdown on Thursday. If you reckon the UK will vote leave it would be wise to wait as you should find the stock going cheap on Friday.
Banking’s Brexit crisis
Royal Bank of Scotland Group (LSE: RBS) was Monday’s second-biggest winner, rising 7.02%. This was a rare piece of good news for investors in the stricken bank, whose share price is still more than 30% lower than a year ago. Investors in the troubled sector already have plenty to worry about, the last thing they need is a banking run on Friday in the turmoil of a Brexit vote. RBS wasn’t the only bank to enjoy a relief rally on Monday, Barclays rose 6.7%, and both stocks are on course for a volatile few days. They will fly on remain, crash on leave. If you fancy picking up cut-price stocks in the wake of a Brexit vote, these two may be high on your list.
The other two fastest risers on Monday were both in housebuilding: Barratt Developments (LSE: BDEV) and Taylor Wimpey (LSE: TW), up 6.77% and 6.82%, respectively. There has been plenty of talk about how Brexit will hit house prices, but there’s another concern here: the UK construction industry is heavily dependent on Eastern Europeans and it would be hit hard if the flow of skilled overseas workers willing to put in a hard day’s graft for minimum wage were to dry up.Â
Nobody as yet knows what would happen to these workers if the UK does shock the world and exit the EU this week, just as nobody knows how the vote will go, or what the longer-term impact will be. What we do know is that these stocks will be right in the firing line and whether Britain decides to stay or go will determine whether their share prices will soar or plummet in the uncertain days ahead.