Analyst names the UK stocks to watch as inflation puts markets on edge

Published Mon, Oct 11 20213:27 PM EDT

While many are nervous about the effects of inflation and central bank moves on markets, there are still several promising U.K. stocks to watch, says Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown. The stocks can be found in a number of sectors, and despite an uncertain economic outlook, companies pursuing the right future-proofing strategies are likely to see further growth, she said. Energy stocks are benefiting from rising oil and gas prices , but the bull run won't last forever as the world gradually attempts the transition to renewable energy, Streeter says. She named BP as a key energy company to watch, noting its investment in wind energy and electric vehicle infrastructure. "Although of course higher oil and gas prices will certainly buoy profits in the short term, obviously over the longer term we're facing a transition to renew energy," Streeter told CNBC's Julianna Tatelbaum for Pro Talks. "So it's got to be those companies who have an eye on both the short term and the longer term. We've seen the likes of BP and Shell , the share price has risen as the oil and gas price has spiked, however those two companies are also investing in this transition to renewables. They've made a lot of commitments, investing in wind, in the rolling out of EV infrastructures," she said. BP in June announced a $220 million investment in U.S. solar projects, and its CEO aims to cut the company's oil production by 40% while boosting its capacity to generate power from renewable sources. BP plans to sell $25 billion worth of its fossil fuel assets by 2025 and reinvest much of the profits in renewables. The company's stock closed at 360.30 pence per share in London on Monday evening, up 1.9% for the session. "Over the longer term, companies who are using these higher oil and gas prices to then reinvest into new renewable sources of energy, they are the ones we should be really focusing attention on," she said. Another area to watch, Streeter said, is banking. Like the energy sector, the banks investing in diversified capabilities are those worth following, she said. Barclays , HSBC and Lloyds are the senior analyst's U.K. banking picks. "As far as banks are concerned, what you're seeing is a lot more diversification into other areas," Streeter noted. "The likes of Barclays, obviously its wealth management arm did particularly well during the huge trading swing that we saw during the pandemic." "HSBC has pivoted to Asia and also increasing its wealth management side of the business, and we hear as well from Lloyds that its just made an acquisition and is looking to expand its retail asset management arm with more provisions for pensions," Streeter said. "So what you're seeing is banks are diversifying from the core business of lending to other streams of income. So you should look at how they're diversifying to bring in more income streams, because this lower interest rate environment — although it's going to lift slightly, it's going to be here for some time to come."

The Bank of England is expected to raise rates by 75 basis points Thursday, its largest hike since 1989.

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