After a disappointing day yesterday the FTSE100 has bounced back buoyed by a recovery in basic resource stocks, and a slide in the value of the pound, while broader European markets have lagged behind as investors stay cautious about political risk in Europe.
The weakness of the pound is undoubtedly acting as a tail wind for UK stocks with dividends in 2017 set to come in at record levels, with special dividends also providing a windfall. Almost half of the FTSE100 currently pays a dividend yield in excess of 3%, and while some of these may be vulnerable to a possible downgrade, it’s unlikely they would be cut completely.
It hasn’t been anywhere near as positive for European stocks which have lagged behind as political risk pushes out spread differentials between German bonds and the rest of Europe, ahead of a key French political debate later today.
