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British stocks set to strengthen amid £6 bln boost in consumer demand - Deutsche Bank

Published: 07:21 03 Jul 2012 EDT

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A clutch of British firms may be poised to benefit if consumer demand in the UK turns out to be better than expected, according to research from Deutsche Bank. 

Equity strategist Gareth Evans says the German bank’s ‘UK to UK’ basket of stocks has outperformed the FTSE350 by more than 11 per cent in the year to date.

And he highlights that domestic stocks on the FTSE250 have outperformed the ‘globally exposed’ stocks by 30 per cent in the past year.

“We believe there is case to be made for UK domestic demand and it could prove sufficient to sustain these already strong performances from UK dependent stocks,” Evans said in a note.

He says the recent drop in oil prices, falling inflation, more QE and perhaps even a modest boost from the London Olympics will lead to improved growth in Britain.

He adds that British consumers have suffered an ‘oil shock’ that’s prevented consumer spending from following the ‘credit impulse’ – which may have otherwise been created by quantitative easing and low interest rates.

However with oil prices now waning he reckons an extra £6 billion worth of consumer spending may be freed up and spent elsewhere over the remainder of 2012.

Evans also points to further stimulus coming from the Bank of England. He believes a further £50 billion of quantities easing (QE) and maybe even a rate cut, could be announced at the next meeting of the monetary policy committee (MPC) on 5 July.

In the meantime he says that Britain’s domestic stocks are inexpensive despite the likes of Debenhams (LON:DEB), Whitbread (LON:WTB), Talk Talk (LON:TALK), Carpetright (LON:CPR) and Ted Baker (LON:TED) all performing well in the year so far.

He picks out four of Deutsche’s ‘buy’ rated stocks to focus on - Next (LON:NXT),  Barratt Developments (LON:BDEV), Greene King (LON:GNK) and William Hill (LON:WMH).

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