How does Brexit effect stock prices?
Posted on 2016-06-29 by myTrades
Brexit will be an unprecedented event in history: no country has ever left the European Union before. Accordingly, it's hard to predict the longer term effects it'll have on stock markets. One thing is sure: it has brought anxiety and turbulence on the market. Let's take a look at what's happened until now.
Brexit will be an unprecedented event in history: no country has ever left the European Union before. Accordingly, it's hard to predict the longer term effects it'll have on stock markets. One thing is sure: it has brought anxiety and turbulence on the market. Let's take a look at what's happened until now.
This chart shows the performance of FTSE 100 since last Monday:
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| FTSE 100 reaction to Brexit news |
Until Thursday, the day of the referendum, there was a cautious optimism on the market with prices increasing each day. The win of the Remain campaign would have meant a reassuring stability, whereas the country's decision to leave the EU resulted in a plunge of stock prices on Friday. The fall continued on Monday, as well, but on Tuesday the index bounced back to where it closed last week. Today it was constantly rising and as you can see on the chart, the closing price reached a new peak.
Of course, an index performing well doesn't automatically mean that all components are the doing the same. Many feared that Brexit would make financial institutions suffer and it seems like they were right. Let's see Barclays, for example:
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| Barclays reaction to Brexit news |
As you can see, if you own shares of this major British bank, it's bad news for you. Unlike the FTSE 100, this stock price hasn't recovered from the shock (yet?). Ending a clear upward trend last week, Black Friday brought a steep fall. This week, all candles are red. Combined with today's low test bar (a signal for hitting a resistance), this may indicate a future downtrend.
Finance is not the only industry facing difficulties. One share of easyJet was worth £1,477 on Monday morning (20th June). A week later it hit rock bottom at £990 - that's a loss of 33% in one single week!
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| easyJet reaction to Brexit news |
Despite the fact that there are many political incertainties and no-one knows what is the next step, the large falls stopped on Tuesday. It'll be very interesting to follow the course of events and the stock market's reaction to them.
Data source: Yahoo Finance