A year after Brexit vote, European and UK shares diverge

[LONDON] Another wobble in commodity-related shares and US dollar earners put pressure on British blue chips on Friday, underscoring their underperformance against continental European peers a year on from Britain's vote to leave the European Union.

Britain's FTSE 100 was down 0.2 per cent at its close, weighed down by weakness in health care and mining stocks - large-cap dollar earners.

Friday marked the one-year anniversary of Britons voting in a referendum by a narrow margin to quit the EU, a shock outcome which then sent sterling, British and European stocks into a tailspin.

While stocks have recovered sharply from their slump in the immediate aftermath, in US dollar terms, British stocks continue to lag peers in Europe and elsewhere as a cloudy outlook for sterling dented appetite among foreign investors.

"Brexit itself, I don't think, has had much of an effect on the market, but what has had an effect has been the fall in sterling," said Paul Mumford, senior investment manager at Cavendish Asset Management.

Mr Mumford said the inconclusive outcome of this month's national election in Britain was also now weighing on sterling.

"Because of the uncertainty that might have arisen from the election result, it may be that sterling is going to stay down longer than we thought," Mr Mumford said.

The pan-European Stoxx 600 index was down 0.2 per cent as falls among financials, pharma firms and energy shares weighed.

Elsewhere, broker changes helped drive price action, with British broadcaster ITV rising more than 3 per cent after Morgan Stanley upgraded it to "buy", citing its attractive valuation.

"Timing is always tricky but typically the right moment to buy TV stocks is when advertising starts to improve, even if this is just on a second derivative basis (i.e. it starts to become less bad)," Morgan Stanley analysts said in a note.

Shares in pizza delivery firm Domino's Pizza were among the biggest fallers, down 2.8 per cent near a two-year low after a downgrade from Berenberg.

Berenberg analysts said Domino's faced potential issues ahead, including falling behind in terms of technology as well as food inflation putting pressure on franchisee margins.

Insurer NN Group was the biggest faller, down nearly 4 per cent after Dutch watchdog KiFid said that the firm must compensate one its clients in a mis-selling case.

Finnish and Swedish markets were closed for a holiday.

REUTERS