Some stability for now

28 June, 2016

All the jokes about the UK exiting Europe twice in one week have been made, so we’ll move on swiftly from that. Markets have seen some reversal from the sharp sell-off of recent days, cable having managed to crawl its way up to near the 1.33 level. Hardly anything to shout about given the extent of recent moves. Equities are also opening slightly to the upside, but this follows on what has been a brutal two sessions, especially in bank stocks, where we’ve seen losses not seen since the depths of the financial crisis back in 2008. The UK has lost its triple-A credit rating from S&P (as well as Fitch), seeing it downgraded two notches to AA. In essence, the UK government bond market appears not too bothered, the 10 year yield holding below the 1.0% level. Two reasons for this. Firstly, ratings agencies generally tell us what we already know, so it’s more a loss of face rather than a new indicator. Secondly, there has been a sizable shift in monetary policy expectations both in the UK and beyond, which is supporting bond markets. A rate hike this year has all but been priced out of the US market, with some risk of an easing priced. In the UK, decent risk of lower rates at the next MPC meeting mid-June has been priced, with some chance that the Bank meets earlier to adjust policy. Best keep on your toes.

Looking beyond the UK and Brexit, we’re seeing some softness on the Swiss franc and also the yen, the latter having moved away from the 100 level on USDJPY. The yuan has also weakened against a resurgent US dollar, which has added a new layer of policy uncertainty for the PBOC, who were previously happy to see a relatively stable USDCNY rate. Overall, the data calendar today contains nothing of significance, with markets far more focused on the pronouncements of policy-makers and in particular central bankers, with ECB’s Draghi expected to speak shortly.


Source link  
Market shows demand for yielding assets

The market shows demand for yielding assets, which in turn supports demand for the stocks and currencies of emerging markets. The main...

Yuan and Dollar as a weapon in trade wars

The US Nonfarm Payrolls on Friday could even be called boring: the report showed the preservation of a completely healthy labour market...

Disappointment with Fed and tariffs

Trump announced 10% tariffs on Chinese goods worth $300 billion since September 1, thus ending the US-China trade truce after disappointingly...


Fed pushes down stocks

Markets have started the week under pressure. Expectations that the Federal Reserve will cut interest rates by 50 points in July collapsed...

Gold updates new 6-years highs

Gold benefits from a combination of two factors: lower interest rates in debt markets and continuing hopes that the global economy...

Markets recede from the recent highs

A strong Nonfarm Payrolls caused pressure on the stock markets, reducing the chances of the interest rates lowering by the Fed in the upcoming months...


Gold resumes rally, pushing past $1400

Gold prices resumed a push higher on Monday, as flows into the precious metal continued on improved prospects for easier monetary policy from...

Gold rises as markets slip

Market caution continues to support gold. Quotes of this metal rose to $1337, repeatedly trying to push above this year highs at the 1340-1360 area...

Trump says Brexit should happen

President Donald Trump promised the U.K. a "phenomenal trade deal" Tuesday, on the second day of his state visit to Britain...

  


Share it on:   or