IG Group, Begbies Traynor could benefit from tariff volatility, says Shore Capital

Shore Capital on Friday shared its initial predictions of how Donald Trump's sweeping trade tariffs might affect businesses in the UK financial sector, following a mass-market global sell-off of equities on Thursday.
"The shock and awe of Trump's capricious foreign policy strategy has created acute anxiety, which is typically not conducive to the health of financial markets. We expect more turbulence and emotional share price responses over coming days," the broker said in a research note.

"The impact of tariff wars on the fundamentals of our UK financials stock coverage will be indirect. Business models over the long term will be affected by changes to: economic growth, wealth formation, inflation, interest rates, financial markets, and associated regional differences."

Companies that tend to benefit from market turbulence and volatility could benefit in the near term, Shore Capital said: TP ICAP from volatility in bond markets, interest rates and FX; and IG Group and CMC Markets from volatility in stocks.

So-called "countercyclical stocks", which might benefit from higher levels of insolvencies in the UK, could also benefit, such as corporate recovery advisory Begbies Traynor and pawnbroker H&T, the broker said.

In the payments sector, volatility in FX markets could boost spreads and support near-term revenue expectations for the likes of CAB Payments and Finseta, analysts added.

Meanwhile, the outlook for banks is more uncertain, Shore Capital said, and depends largely on changes in economic activity levels, overseas development and the path for interest rates. The broker said that small and midcap banks focused on the UK market, such as Arbuthnot, Close Brothers, OSB, Paragon, Secure Trust and Vanquis, are less at risk from international trade fallout.