Ten US stocks are heavily dependent on the UK’s exit from the EU after entering the market, according to Goldman Sachs. In a research note, investment bank analysts said these 10 companies are the biggest revenue disclosures for the UK, generating more than 15% of their sales from that.
Las acciones son: Newmont Mining Corp (NEM), Pembina Pipeline Corp (PPL), Affiliated Managers Group Inc. (AMG), Willis Towers Watson PLC (WLTW), Invesco Ltd. (IVZ), News Corp. (NWSA), LKQ Corp. (LKQ), Mellon Bank of New York Corp. (BK), MSCI Inc. (MSCI) y CBRE Group Inc. (CBRE)
Newmont Mining was identified as the company that represented the majority, with three-quarters of its sales coming from the British Isles.
Better performance in some stocks
Last year, Goldman Sachs noted that US stocks with the largest share of UK sales contributed less than 1,000 basis points (BPS) ahead of domestic stocks between January and mid-December. Analysts expect current uncertainty about Britain’s plan to leave the European Union (EU) to those same companies after the British Parliament rejected Prime Minister Theresa May’s Brexit talks.
Since the Brexit vote was delayed on December 10, Goldman said that US stocks facing the UK outperform the rest of the S&P 500 Index by 190 basis points. Next, analysts predicted “upside potential if a clear path forward emerges.”
50-50 probability of delay
According to Goldman economists, there is now a 50% chance that Brexit will be delayed and eventually completed with closer ties to the EU. This scenario, they noted, has benefited US stocks that do business with their UK counterparts.
If Brexit is addressed, the investment bank also expects the British pound (GBP) to strengthen against the US dollar (USD). Goldman predicts that the British pound will rise 9% against the US currency over the next 12 months as a result of successful negotiations, coupled with slowing US growth and dovish Fed policy. Analysts, again drawing on examples from last year, noted that stocks exposed to the UK tend to outperform the British pound sterling.
Not without risks
Despite a generally bullish stance on the outlook for Brexit, Goldman warned that Britain’s deal to leave the EU is “very uncertain” and that any difficulties could negatively impact UK exposed stocks in the S&P 500.
For example, banking economists said there is a 10% chance that the UK will exit the EU without taking action. Many believe that a recession in the UK economy without trade agreements in place could pose a major threat to global growth.
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