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UK stocks set for strong open on Brexit news

UK assets are expected to open stronger thanks to the conclusive election result overnight.

The FTSE 100 is set for a strong open this morning, as UK assets benefit from the election result and the China deal news. A significant level of uncertainty looks to have been lifted from UK assets, and we could see the FTSE 100 and FTSE 250 gain from here, having successfully rebounded over the past couple of days.

Key winners in the wake of the news will be UK-focussed stocks, with housebuilders in the frame for further gains, as the sector is supported by hopes of a return to UK economic growth and the removal of fears that a Labour government would impose a more punitive taxation regime. Other gainers today could well be financial services stocks – this might seem odd, given how the new government has won power promising a hard Brexit, but with such a solid majority Boris can afford to pivot away from this position, boosting hopes of a deal that will allow UK banks access to EU markets without excessively-onerous intervention.

As well as the domestic stocks that are set to gain, we should watch out for more international names that might struggle as the pound continues to strengthen. Sectors such as pharma and mining rallied on the day of the Brexit result as sterling weakened, but today the reverse could be in play. A stronger pound hits overseas earnings, and could result in a tough day for miners like BHP Billiton and Rio Tinto, along with the pharmaceutical giants AstraZeneca and GSK.

It will be interesting to see whether the election result helps to reverse the negative view of UK assets that has prevailed since 2016. There is a lot of work to be done in securing a new relationship with the EU, and the time this may take cannot be understated, but perhaps a steady flow of investor funds will help the UK’s stock market make up some lost ground.

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. See full non-independent research disclaimer and quarterly summary.

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