Referendum Rewind: What was the reaction to Brexit?

June 24, the Friday following the referendum, was a day that will live long in the memory of many investors and traders alike, as the first big shock of 2016 made its mark on financial markets.

The surprise result saw an incredible day of trading on the London Stock exchange, with some stocks falling as much as and a 50% of their opening share price on the day, a feat almost unheard of on a large scale, as names such as Dixons Carphone (58%), Next (50%), Persimmon (42%) and Associated British Foods (45%) suffered. When the dust settled, these blue-chip UK stocks finished the day having experienced one of their hardest sessions in history.

There was no let up as markets reopened the following Monday. Seven stocks all halted and put into auction having fallen over 8% from their opening price, including Banks Barclays (-10.4%), RBS (-14.5%), Housebuilders Taylor Wimpey (-12.3%), Berkeley Group (-10.6%), Crest Nicholson (-10.3%) and Barratt Developments (-12.1%), while Airline EasyJet was the worst affected stock, eventually falling by 19.4% on the day.

As you can see above, the sectors most impacted by the vote were mostly UK-focused or companies that earn profits denominated in Sterling; UK Airlines, Banks, Housebuilders and Retailers in particular were targeted.

Conversely, however, stocks that earn their profits in Dollars were perversely boosted by the positive translational gains; multinational corporations, exporters and producers of buck-denominated commodities.

Now, 6 months down the line, the UK Index has since seen its longest run of record intraday and closing highs in history, and has flirted with 7400. Could we see moves of this proportion again once Article 50 is triggered?

Lightning strikes twice: Will Article 50 mirror Brexit?

After the triggering of Article 50, the stock market reaction will unlikely be as sharp and immediate as the referendum aftermath – after all, unlike the referendum result, it won’t come as a surprise – however, the divorce negotiation will likely see financial markets be continually influenced by Brexit over the next two years.

The focus for markets will be on what concessions the EU will allow the UK and, as a result, how many of her objectives the PM is able to achieve from the negotiations. The new UK-EU deal could see huge differences in the way Britain deals with the rest of Europe, hurting some companies while benefitting others.

Even more interestingly, once completed, the UK is free to negotiate independent trade deals with other major nations. Already Australia, New Zealand and the US have expressed interest in making new trade deals. The latter, in particular, could greatly affect the UK economy as the “special relationship” breaks new ground.

As a consequence, we are likely to see UK stocks and Pound Sterling FX pairings being impacted considerably by the ongoing stream of Brexit news. Sectors especially influenced will likely include Finance – most notably Banks and Insurers – and Retailers – both Supermarkets and non-food retailers – amongst others

With the Brexit vote still fresh in the memory, we have picked six UK 100 stocks – three that reacted negatively and three that reacted positively – that could offer you a trading opportunity once Article 50 is triggered!