Wednesday, 29 June 2016 15:01 Written by

Global markets advance as Brexit concerns recede 29-06-2016 by IFC Markets


US stocks rebounded on Tuesday recovering some of the steep losses after the Brexit shock. The dollar weakened as euro and British Pound recorded first gains after Brexit vote: the live dollar index data indicate the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, slipped 0.3% to 96.022. The Dow Jones industrial average gained 1.6% settling at 17409.72. The S&P 500 rose 1.8% higher at 2036.09 led by financial and energy stocks with all ten sectors ending higher. The Nasdaq index rallied 2.1%. The CBOE Volatility Index, which is used as a measure of fear or volatility in financial markets, fell about 21% on Tuesday to near where it was before the UK vote. It was its largest one-day percentage decline since August 2011. Federal Reserve Governor Jerome Powell said Brexit shifted global risks to the downside, reinforcing expectations that the central bank will not hike US rates this year. The economic news were positive: the US GDP growth in the first quarter was raised from 0.8% reported last month to 1.1% in line with expectations, US house prices rose 1.1% in April and consumer confidence rose in June. It should be noted that the survey of consumer expectations was taken before Britain’s vote to leave the European Union. Today at 14:30 CET May Personal Income, Personal Spending and Personal Consumption Expenditures will be released, the tentative outlook is positive. At 16:00 CET May Pending Home Sales will come out, the tentative outlook is negative.

European stocks advanced on Tuesday after two-day selloff precipitated by UK’s decision to leave the EU. The euro strengthened 0.5% against the dollar while British Pound gained 0.7%, rebounding from 30-year low. The Stoxx Europe 600 added 2.6%. Italian bank shares jumped on news the Italian government is considering adding 40 billion euros ($44 billion) to the country’s financial system to stabilize it in the wake of Brexit. Germany’s DAX 30 rose 1.9% to 9447.28 helped by a 2.6% gain in Volkswagen’s shares. The German carmaker was expected to announce it will allocate $15 billion for resolving its emissions cheating scandal in the US. France’s CAC 40 ended 2.6% higher as did UK’s FTSE 100 . UK’s Prime Minister David Cameron is meeting EU leaders at a two-day summit which started Tuesday. In economic news German import prices in May rose more than expected over previous month but still fell year-over-year. Today at 14:00 CET June preliminary Consumer Price Index will be released in Germany, the tentative outlook is negative.

Asian stocks are rising today with MSCI's broadest index of Asia-Pacific shares outside Japan up 1% as markets calmed after losing $3 trillion in value in two sessions following Britain's shock vote, according to S&P Dow Jones Indices. Hong Kong’s Hang Seng Index is up 0.9% with Shanghai Composite Index 0.5% higher, and Australia’s S&P ASX 200 is gaining 0.8%. Nikkei rose for third session in a row today adding 1.6% as Brexit concerns subsided. Japanese Prime Minister Shinzo Abe told finance minister Taro Aso and the central bank head to provide ample funds to the market signaling readiness to intervene in financial markets to stem yen's excessive appreciation following the UK vote.

Oil futures prices are gaining today after data from the American Petroleum Institute released late Tuesday showed a bigger than expected decline of 4 million barrels in US crude inventories last week instead of the 2.4 million forecast by analysts. At 16:30 CET today US Crude Oil Inventories will be released by Energy Information Administration. August Brent crude rose 3% to $48.58 a barrel on London’s ICE Futures exchange on Tuesday.


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