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TIDE TURNING FOR DOMESTIC EXPOSED AND RATES SENSITIVE UK PLAYS - BARCLAYS

UK domestic and rate sensitive plays like homebuilders are seeing fortunes improve according to Barclays equity strategists.

"Calm in the gilt market has returned and we think that the BOE has more legroom to cut rates now," they write, mentioning the weak growth and sticky inflation that had kept UK domestic plays subdued.

"...our economists expect the MPC to cut Bank Rate by 25bp at its May meeting next week, and revise down its inflation forecast, signalling that the balance of risks has shifted to a less inflationary outlook."

The FTSE 250 .FTMC is down 2.4% this year. But a basket of FTSE 350 homebuilders .FTNMX402020 is up over 13% since the beginning of April.

"Last spring, expectations of political change ahead of the general elections brought global investors back into the UK, and saw domestic plays and the broader FTSE250 performing strongly for a few months" says Barclays.

But they say the hype didn't last long and since valuations are depressed, the bar for positive surprises is low.

The BoE will announce its next policy decision on Thursday, where a quarter-point cut is priced in by the market.

(Lucy Raitano)

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