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Citi: UK stocks are the cheapest since WWII
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Loading...According to Citigroup Inc. British stocks have not been so cheap (on a relative basis) since the Second World War. In the analysis, Citigroup compares the interest rates of British corporations' bonds to the dividend yield of UK stocks.
According to Citi, the FTSE100 index will rise to about 7500 by the end of the year from its current level around 7380.
The reason for the low valuation of shares is probably the negative sentiment around Brexit. Since 2016, this has been the driving force behind UK stock markets. Factors we are tracking for a change of sentiment towards Britain.
One of the stocks we monitor is Redrow (RDW.UK). Despite Brexit, the company reported strong performance on September 4, noting that demand for housing in the UK is strong. Most analysts expected a weak performance from construction companies in England, relying on the argument that Brexit will weaken the demand for housing by foreigners. Redrow's results show that the truth is different.
The price forms a double bottom. Currently trying to break the resistance of 50% Fibonacci around 5.907: this level coincides with the start of the formation and the 200-day MA. A break out above 5.92 is a decisive trend-turning movement; in this scenario, we will be looking to initiate a long position after retest of the 200-day MA and 50% Fibonacci.
Entry: We recommend an entrance around 5.92.
S/L: 5.82 - if the price drops below 5.82 it will erase the gains from today's strong bullish candle.
Alternative scenario: If the price does not stay above 5.91-5.92 (does not close above this level), the bullish scenario is rejected. The strong upward movement was a bull trap.
Source: Bloomberg Finance L.P.
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