Brexit reality threatens global markets

24 June, 2016

Brexit reality threatens global markets

Global sentiment was dealt a devastating blow during trading on Friday following the shocking Brexit victory that renewed a wave of uncertainty and soured investor appetite. With the Brexit now a reality, financial markets have entered a state of shock as concerns heightened over the impact a Brexit could have on the global economy. It should be kept in mind that the Brexit anxieties go far beyond the borders of the United Kingdom and fears are already growing that a knock-on effect could cause other countries to the leave the European Union, consequently crumbling the Euro project. With uncertainty set to intensify as investors ponder on the likely impacts of a Brexit to the UK and global economy, risk aversion could be the central theme moving forward.

Stock markets were left vulnerable, with most major equities stumbling as concerns over the immeasurable impacts of a Brexit to the global economy encouraged investors to scatter away from riskier assets to safe-haven investments. Fears of a Brexit fueled recession have hit unimaginable levels and could ensure that most stocks remain depressed for an extended period. In Asia, stocks headed for their steepest decline in five years as an awful combination of Brexit jitters and Yen’s resurgence provided a foundation for sellers to attack prices. The bearish contagion and negativity from Asia has already punished European equities and should seep into Wall Street when the American markets open. Global stocks may be set for extended declines in the medium term as concerns over slowing global growth, risk aversion and renewed Brexit anxieties haunt investor attraction towards riskier assets.

The FTSE100 entered a freefall with the index declining over 7% - its biggest fall in history as elevated concerns over the untold impacts of a Brexit to the UK economy encouraged investors to depart from riskier assets. With the rating agency S&P suggesting that the UK may relinquish its AAA rating following the Brexit victory, further declines in the FTSE100 could be realized moving forward. From a technical standpoint, the index is heavily bearish and the breach below 6000 could re-open a path back towards 5900.

Brexit sends Sterling to 30 year low

The Sterling/Dollar plunged to 30 year lows at 1.3230 during trading on Friday following the unexpected Brexit victory which renewed concerns over the future of the United Kingdom. With expectations mounting that the Bank of England may slash UK rates amid a potential Brexit fueled recession, Sterling bears have received enough encouragement to install another round of selling. Sentiment remains bearish towards the pound and the post-Brexit anxiety should haunt investor attraction towards the currency further. From a technical standpoint, in the space of 24 hours the GBPUSD has hit a 2016 high at 1.5015 and low at 1.3230. This pair is immensely bearish and previous support around 1.3850 could become a dynamic resistance that encourages sellers to send price towards 1.3200.

Brexit threatens Eurozone stability

The Eurozone was placed under pressure post Brexit victory and could be in store for more pain as concerns heighten over a domino effect causing other European countries to leave the E.U. For an extended period faltering inflation levels and declining commodity prices have punished the Eurozone while the ongoing global instability exposed the nation to downside risks. This Brexit development could leave the European Central Bank under more pressure to take action in an effort to bolster economic growth and renew some stability. Sentiment remains bearish towards the EUR and the currency could be poised for further decline as the Brexit contagion bolsters speculations over other countries leaving the E.U.

The EURUSD experienced a very sharp decline during trading on Friday following the combination of Euro weakness and Dollar strength that offered an opportunity for sellers to send prices lower. Although the pair experienced a sharp correction higher towards the 1.1200 support, prices could be set to trade lower when bears reload their shorts. From a technical standpoint, the candlesticks are below the daily 20 SMA while the MACD trades to the downside. Previous support around 1.1200 could transform into a dynamic resistance that encourages another decline to 1.1000.

Dollar Index surges higher

Dollar bulls were offered inspiration following the Brexit victory which created a risk-off environment and this consequently encouraged investors to seek safety such as the Dollar and Yen. Although short term Dollar gains may be expected in the future as investors seek safety, it should be kept in mind that the Brexit could sabotage all efforts by the Federal Reserve to raising US rates. With expectations diminishing over the Fed taking any action in Q2, the Dollar could be vulnerable to losses and such could offer an opportunity for bearish investors to attack.

GoldВВ prices clips near 2 year highs

Gold surged ferociously with prices conquering near two year highs at $1358 following the shocking Brexit victory which triggered a wave of risk aversion and soured investor risk appetite. With concerns elevated that a Brexit fueled recession may be pending, coupled with the ongoing fears over faltering global growth, Gold bulls have been provided a foundation to install another heavy round of buying. Expectations continue to fade over the Federal Reserve raising US rates amid the Brexit concerns and this should bolster Gold despite the Dollar rally.ВВ  From a technical standpoint, Gold is heavily bullish and could be destined to trade back towards $1350 as anxiety encourages investors to seek safe-have safety.


Source link  
Fed minutes turned bulls to bears

Volatility soared in equity and fixed income markets in the final hours of yesterday's U.S. trading session. After dropping to 17, the Cboe...

Global shares extend recovery

Asian equity markets continued to build on last week’s gains, after U.S. stocks capped their best week since 2013. Investor sentiment has gradually...

All eyes on U.S. inflation figures

After wiping off more than $5 trillion in market cap past week and volatility hitting the roof, global equities are finally showing signs of stabilization...


Equities continue to be a mixed bag

The US equity markets were another rollercoaster for traders for the open of the week as the S&P continued to try and surge back after the recent movements from...

Equity bears take back hold

The equity bears are back in town and they most certainly have their claws out. Markets had briefly recovered and were looking upbeat for the most...

Market's wild ride not over yet

Investors across the globe are finding it difficult time currently to decide on whether to buy the recent dips, or to remain on the sidelines until the dust...


Equity markets shake of the bears

Markets have been hot and cold today as equities saw some intense volatility. For most, it was the beginning of the end at the start of the week...

Global equity markets drop sharply

Global markets were having a case of the Monday blues today as they tumbled sharply on the back of fears around global economic growth and a potential slowdown.

Markets adjusting to new reality

When markets are priced for perfection, a slight shift in sentiments causes much damage. This is what we saw last week after U.S. jobs report showed...

  


Share: