Brexit Draft Deal Makes These Sector ETFs A Must-See
Zacks Investment Research | Nov 15, 2018 08:00PM ET
The United Kingdom has finally struck a draft deal with the EU pertaining to Brexit. However, there has been unrest in the parliament, with at least per CNBC .
Amid such hostility, it’ll definitely not be a cakewalk for Theresa May to get the Brexit deal done, though the prime minister has vowed to get it through despite the marked divisions. This scenario brings the below-mentioned ETF areas under the spotlight.
Europe Financials
As soon as Britain cuts the cord with the EU, its importance as a corporate transit to the rest of Europe would be lost, going by an article on Goldman Sachs (NYSE:GS) Proposes a Eurozone Banks ETF ).
Investors should note that if a comprehensive deal is not reached, “lenders would have been more exposed to a possible contraction in U.K. growth,” a “lower-for-longer rates and any potential change of direction in the credit cycle,” per an analyst Andrew Coombs .
Airlines
This is one of the most vulnerable sectors as issues related to “as quoted on Bloomberg .
Also, oil prices play a crucial role in the airlines’ cost structure. If oil prices manage to see an uptrend in the coming days on the possible fresh OPEC output curb deal, airlines may suffer on profit margins. All these put focus on pure-play airlines ETF US Global Jets ETF ( (KL:JETS) ) (read: Will Airlines ETF Keep Gaining Altitude Ahead? ).
Hotels and Restaurants
The pound dived to a 31-year low when results of the Brexit referendum came out on Jun 23, 2016. To date, Invesco CurrencyShares British Pound Sterling FXB has lost about 7% since Jun 24, 2016. It made trips to U.K. cheaper for foreign tourists. But some of that gain has been wiped out by falling business travel, per Blomberg.
Marriott International Inc. ( (NASDAQ:MAR) ) and Hilton Worldwide Holdings Inc. (NYSE:HLT) both expressed concerns about the dampening impact on room rates due to Brexit talks. Marriott particularly highlighted weaker demand from the financial services sector, per Bloomberg. Invesco Dynamic Leisure and Entertainment ETF (PEJ ) will thus comeunder pressure.
Auto
According to an article published on Bloomberg, carmakers like Peugeot and Citroen producer PSA Group have persuaded the UK and EU to negotiate a deal to avert disturbances to production. The Society of Motor Manufacturers & Traders (SMMT) estimates that 80% of the cars made in the United Kingdom are exported and the maximum share of it goes to the EU. This puts First Trust NASDAQ Global Auto ETF (CARZ ) under focus.
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