What's going on?

A survey out on Monday of�the United Kingdom�s construction activity highlighted the near term hit that Brexit could have on the UK economy. It suggested that June�s conditions were the weakest for the sector in seven years as the uncertainty created by the vote caused a significant slowdown in activity.

What does this mean?

80% of the survey�s respondents answered the survey prior to the referendum � so the results show the impact pre�-vote. One fear is that if the uncertainty of the vote itself had that much of a negative impact, then the overhanging uncertainty that is lingering post-vote could have a similar, or even worse, impact. That helps explain why shares of UK housebuilders have been some of the hardest hit since Britain voted to leave the European Union: shares of most major British homebuilders are down about 30%.

Why should I care?

The bigger picture: Stock markets have recovered overall � but that masks some serious weak spots. While most major stock markets, including Britain�s FTSE 100 (the 100 biggest public companies listed in the UK), have recovered most/all of their post-Brexit losses, some sectors remain deeply underwater. UK housebuilders represent one such sector, but UK banks and many retailers have also been affected (e.g. companies that are exposed to the UK economy). So, it�s not all rosy out there�

For stocks: The rise of (some) UK stocks shows the importance of a�currency’s value. The pound has sold off significantly versus most other major currencies. That helps explain why many of the UK�s largest public companies have seen their shares go up: these companies (e.g. miners and pharmaceutical companies) typically make a lot of their money overseas. But their stocks are priced in pound terms. And so, their overseas earnings are now worth more in pound terms and, as such, their stock prices go up. The same thing happens in reverse in the US when the US dollar strengthens (as it has done a fair bit in the past few years).