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  
Markets pressured by Huawei problem

Alphabet and some other American IT companies have suspended business with Huawei, which is one of the first examples of major consequences for...

The climate is changing rapidly

British people need to fly less, drive electric cars, eat little meat and turn their home thermostats down to 19 degrees Celsius (66 Fahrenheit) in order to rein...

Chinese stocks saw their worst week

Chinese stocks have taken investors on a ride this year. Shanghai and Shenzhen have been the best performing global markets this year, with the Shanghai...


Risk-sensitive currencies on the rise

Stock markets show growth after the release of strong data for China and Japan as their respective PMIs were better than expected which supported...

Trump again puts pressure on OPEC

President Donald Trump told OPEC on Thursday that its members should start pumping more oil, marking his second warning to the producer group this year...

Turkish lira fell by 5% before elections

The Turkish lira dropped by as much as 5 percent against the dollar on Thursday morning, as the country gears up for elections this weekend. The greenback...


May won't ask for a long Brexit delay

Prime Minister Theresa May won't ask the European Union for a 'long' delay to the Brexit deadline, her office said, after pro-Brexit ministers objected...

Demand for safe assets grows

Markets remain under moderate pressure, despite the Fed comments. Powell's semi-annual speech in Congress reinforced expectations that the US Central Bank...

US-China trade talks: deadline postponed

China's blue-chip index jumped more than 6% on Monday morning on news that Trump would postpone of the tariff's introduction. The U.S. President...

  


Share it on:   or