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Brexit catches markets by surprise 27-06-2016 by IFC Markets

 

US stocks recorded biggest one day drop in ten months on Friday as Britain voted to leave the European Union. The dollar strengthened considerably supported by increased haven demand while euro and British Pound slumped: the live dollar index data indicate the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, jumped 2.25% to 95.61894.17, adding 1.9% over the week. The Dow Jones Industrial Average lost 3.4% settling at 17399.86, led by JP Morgan and Goldman Sachs which dropped 7% and 7.1% respectively. The blue chip index ended the week 1.6% lower. The S&P 500 dropped 3.6% to 2037.40 , its biggest one day percentage decline since August 24, 2015 , down 1.6% for the week. Nine of ten main sectors closed sharply lower led by financials, materials, and tech stocks. Utilities managed to close marginally higher due to heightened demand for safer assets. The Nasdaq Composite Index tumbled 4.1% to 4707.98 as investors dumped biotech and technology stocks. The tech index lost 1.9% over the week. The increased uncertainty in financial markets resulted in higher demand for safe assets with US Treasury yields declining to a nearly four-year low and fed fund futures prices indicating traders price in a 7.2% chance of a rate cut in July instead of a hike, according to CME Group’s FedWatch tool. Other economic data were also not positive: the May durable goods orders came in worse than expected and consumer sentiment declined. Federal Reserve stated it is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy. S&P 500 and DJI futures are pointing to lower opening for US stock markets today. At 16:30 CET May Advance Goods trade Balance will be released. The tentative outlook is negative for dollar. At 17:45 CET June preliminary Services and Composite PMIs will be published, the outlook is positive. At 18:30 CET June Dallas Fed Manufacturing Activity index will come out, the outlook is negative.

 

European stocks plunged on Friday recording biggest daily losses since October 2008 financial crisis as the majority of Britons voted for UK leaving the European Union. The euro weakened against the dollar hitting as low as $1.0909, its weakest level in more than three months. The pound trimmed its earlier losses against the dollar to finish Friday at more-than six year low of $1.3679, an 8.05% daily loss. The Stoxx Europe 600 tumbled 7% led by bank shares, the worst session since October 2008. German DAX 30 stock index tumbled 6.8% to 9557.16. France’s CAC 40 plummeted 8% and UK’s FTSE 100 dropped 3.2% rebounding from sharp early losses. No important economic data are expected today in euro-zone. FTSE100 GBPUSD

Asian stocks are recovering today after Friday’s selloff. Shanghai Composite Index is 1.26% up while Hong Kong’s Hang Seng Index is down 0.4%. Australia’s All Ordinaries Index is up 0.52%. After 7.9% drop on Friday Nikkei rebounded 2.4% to 1225.76 today despite continued strengthening of yen while Japanese officials warned repeatedly they may intervene in currency markets to stabilize the yen. Exporter ended lower with Toyota and Panasonic down 1.7% and 1.14% respectively.

 

Oil futures prices are declining today after closing sharply lower on Friday. Investors are concerned about negative impact of continued crude oversupply against the backdrop of possible reduction in UK oil demand as country’s economic growth slows down after Brexit. August Brent crude dropped 4.9% to $48.41 a barrel on London’s ICE Futures exchange on Friday.

 

Note

This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.

 

Source: http://www.ifcmarkets.com

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