What might Brexit mean for Barclays' share price?
Last month, Barclays analysts said that a no-deal followed by a recession was the most likely outcome of the Brexit process, but with opposition MPs looking to block this path what could it mean for the bank’s share price?
Last month, Barclays said that a no-deal Brexit looked ‘increasingly inevitable’ and would lead to the UK economy slipping into a recession, according to an analyst note seen by Bloomberg.
But a no-deal exit looks considerably less likely after Tuesday night, where MPs defeated Prime Minister Boris Johnson by 328 votes to 301 to take control of the agenda and requested yet another Brexit delay in a move that is likely to prompt a general election on October 14.
Brexit delay bad news for Barclays
In the wake of the decision, Barclays share price climbed more than 1% to 137p a share as of 11:10 GMT on Wednesday. However, on a year-to-date basis, Barclays stock is down some 8%, reflecting an extremely challenging environment for British lenders.
Despite the brief uptick in Barclays share price in response to MPs actions last night, yet another delay to Brexit to January 2020 would likely hurt the long-term economic outlook in the UK and weigh on British banking stocks.
In August, HSBC retained its buy rating for Barclays stock, while Goldman Sachs reiterated its neutral rating, with the two investment banks issuing a target price of 200p and 190p respectively.
Britain sliding into recession as business activity shrinks
According to the latest IHS Markit’s Purchase Managers’ Index (PMI), it signals that the UK economy is contracting at a rate of 0.1% and unless something brings about a bounce in September, Britain could slide into a recession.
‘After surveys indicated that both manufacturing and construction remained in deep downturns in August, the lack of any meaningful growth in the service sector raises the likelihood that the UK economy is slipping into recession,’ Chief Business Economist at IHS Markit Chris Williamson said.
‘The PMI surveys are so far indicating a 0.1% contraction of GDP in the third quarter,’ he added.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Trading around Brexit
Find out how the UK’s exit from the EU continues to affect traders, and discover:
- The unique opportunities in a ‘hard’ and ‘soft’ Brexit
- The markets you should be watching
- Everything that’s happened so far
Live prices on most popular markets