Pegler’s market report – 21.06.16: From Brexit jitters to Brexit panic!

As published in the Brighton Argus (21.06.16) Business on page 21 under the title Pegler’s Market Report:

From Brexit jitters to Brexit panic!

The ‘Bremain’ camp might not be selling the benefits of staying in the EU but they are certainly having a global impact into worrying investors about leaving. Gold neared a two-year high after the Fed’s policy statement cited the EU referendum as a one of the factors in its decision to leave rates on hold and suggested it would be less aggressive in tightening monetary policy next year. The Bank of England also warned that although consumer spending is solid, uncertainty about the referendum is delaying major economic decisions that “are costly to reverse”. With only days to go to the referendum investors must brace themselves for further market volatility.

Although European banks have been in the doldrums of late many are still forecasting strong growth. Far from being worried by the possibility of the UK leaving the EU, the City of London’s biggest concern is that increased competition will limit firms’ ability to do more business over the next year.

Despite the Brexit woes a few companies bucked the trend during the week – WS Atkins, that operates mostly in the engineering / project management sector, and N Brown the home shopping business posted decent results and pleased investors.

Profits at Mulberry tripled in the last year after the British handbag maker refashioned its strategy towards more affordable luxury leather goods. Mulberry’s chief executive said the return to growth in sales and profits gave the company “strong foundations” following a misguided move by previous management to push up prices that ended up alienating customers.

Another luxury brand, Jimmy Choo, put its best foot forward after reporting a robust trading update that helped the high-end footwear retailer record its biggest daily rise ever. Jimmy Choo does benefit from a natural hedge against any weakening in sterling, as it makes almost two-thirds of its sales outside the UK.

Elsewhere, online estate agent Purplebricks’ shares jumped after it said its UK business would be profitable this financial year and announced plans to launch in Australia.

Finally, Hollywood Bowl, the operator of ten-pin bowling lanes, plans to float in London next month. The Hemel Hempstead-based leisure business, which owns 54 centres across the country, including a number in Sussex, is the largest ten-pin bowling operator in the UK, accounting for a third of the market.

By David Pegler, Brighton Capital Management