Brexit weighs on trade but Goldman seeks bargains

With the City whispering of a shock Brexit vote a little more than two weeks before the referendum, punters would be forgiven for sitting on their hands.

Goldman Sachs, the closely followed American investment bank, though, was picking over opportunities among those UK-listed companies exposed to the British economy and the vote.

The bank told clients that domestic-facing stocks were trading at a discount of about 12 per cent versus the FTSE All-Share index, which Goldman said presented decent value.

“Should we see a vote to remain in the EU, we would expect relief for the mid-caps and especially for the UK domestic names,” Goldman said.

Those exposed to the UK economy include financial services companies such as Lloyds Banking Group, up ½p to 70¼p, industrial services stocks such as Travis Perkins, 17p better to £18.71, retailers such as Next, up 110p to £54.70, and leisure companies such as Whitbread, up 33p to £41.78.

Goldman was also cautious about the cushion for UK-listed exporters from a weaker pound should trade agreements be hit in the event of Brexit. The bank estimated that although 80 per cent of FTSE 100 sales are outside the UK, about 55 per cent of FTSE 100 company assets are also offshore.

“Many of these companies are not exporters so much as simply UK-listed companies that operate elsewhere,” Goldman said.

On currency markets, sterling, which touched a three-week low at the start of the week amid a narrowing of the referendum polls, recovered 1.1 per cent to $1.4591 against the dollar after a couple of polls gave Remain a slight lead.

The FTSE 100 struggled to hang on to decent gains made earlier in the session when it touched 6,322.60, its highest since late April. The UK’s top share index closed up only 11.13 points on 6,284.53 as a rally among miners cooled. Anglo American was the biggest faller, off about 21p to 665½p.

Brent crude, the international benchmark, supported shares, however, as it traded at a fresh high for the year and at its dearest since October, hitting $51.30 a barrel before easing back slightly. Royal Dutch Shell A shares gained 55p to £17.56, the FTSE 100’s biggest riser, bolstered by the oil major’s announcement of deeper cost cuts after its £35 billion acquisition of BG Group.

The oil rally and bullish broker research gave Weir Group a lift, 37p better to £13.02. Canaccord Group upgraded the Glasgow-based engineering group that is exposed to the black stuff to “hold” from “sell”, arguing that the large discount to US peers, which have rebounded strongly, were unjustified.

Bearish broker research from Investec, which reiterated its “sell” rating on Tullow Oil as it cited worries about a refinancing of the explorer’s debt, was brushed off. The shares rose 11¼p to 253p.

Underperforming the FTSE 250 was Tullett Prebon. Amid fears of delays to its purchase of Icap’s voice-broking business because of limited competition worries, the shares eased more than 11p to about 314p. M&A elsewhere was collapsing. RIT Capital Partners, the investment trust chaired by Lord Rothschild, walked away from making a bid for the rival Alliance Trust, whose shares shed 3½p to 513p. RIT fell 10p to £15.94.

On-target efforts boost Goals

As MPs tackled Mike Ashley during a hearing yesterday over the running of his retail empire, the tycoon could find some consolation in the recent form of Goals Soccer Centres, the five-a-side outfit.

Like Sports Direct, Goals has been on the back foot but a recent board shake-up and last week’s £16.75 million share placing have lifted the share price.

Goals was given another leg up yesterday when N+1 Singer backed the new management’s strategic review. Upgrading back to “buy” from “hold”, the broker said that the plan, which involves reviving Goals’ UK sites, formed the “basis of a more credible recovery story”.

Meanwhile, Andrew Monk, chief executive of VSA Capital, the broker, was intrigued by Suning Commerce Group, the Chinese retailer, agreeing this week to buy a majority stake in Inter Milan. The Serie A football club’s chief executive is Michael Bolingbroke, who is a new non-executive director of Goals.

“You don’t need a degree in advanced engineering and geopolitical studies to work out what is coming next,” he said.

Shares in Goals, in which Mr Ashley’s Sports Direct is a top 20 shareholder, closed up 5p at 118½p.

Wall Street report

The S&P 500 tested its record high aided by an upbeat economic view from Janet Yellen, the Federal Reserve’s chairwoman, on Monday. It closed up 2.93 points at 2,112.34. The Dow Jones industrial average closed at 17,938.28, up 17.95 points.

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