UK Labour's win: a burden for Diversified Financials and Insurance, a relief for Utilities
STOXX 600 up 0.5%
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Labour wins big majority
Payrolls in focus
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UK LABOUR'S WIN: A BURDEN FOR DIVERSIFIED FINANCIALS AND INSURANCE, A RELIEF FOR UTILITIES
With a centre-left Labour winning a massive majority in the UK parliament, already largely priced in by markets, investors are assessing the implications of the future government across the British economy.
J.P.Morgan analysts believe that Labour's policies may have a neutral impact on banks, although recent comments from Keir Starmer ruling out further taxes should support a positive view.
Their preferred picks are Natwest NWG.L and Barclays BARC.L, which have reported record profits in the past two years, boosted by robust lending margins and low volumes of loan defaults.
However, they pointed out that the road may be more tortuous instead for the diversified financial stocks given the risk of an increase in Capital Gains Tax, which could impact the pace of net flows for UK wealth managers and platforms.
"An increase in the tax for financial assets would be unhelpful for the domestic wealth and asset gatherers, such as St. James's Place, Quilter, Hargreaves Lansdown, Abrdn and Schroders' wealth business," they said.
Labour's programme is also seen by JPM as negative for personal lines insurers as the party suggested it will seek to review the rising cost of car insurance.
"This issue in particular will be negative for sentiment for those names exposed to UK personal lines insurance such as Admiral, Direct Line and Aviva," they said.
Meanwhile, utilities such as National Grid NG.L will likely benefit from an increase in investment and from the next regulatory period, starting in April 2026, which may be "supportive of higher capex and at an attractive return for investors," the broker said.
(Matteo Allievi)
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