Is the Rebound in Global Markets Sustainable?
The SPDR Euro STOXX 50 ETF (FEZ) rose by 2.6%. The United Kingdom’s (FKU) FTSE 100 was among the leaders in European markets. It rose by 2.6%.
The US Dollar Index measures the strength of the dollar against a basket of major currencies. It fell by 0.30% on June 28. This ended the upward trend.
The U.S. Bureau of Economic Analysis published the final 1Q16 GDP figures on June 28, 2016. The GDP rose by 1.1%—above the forecast of 1.0%.
Latin American markets were under pressure on June 27 following a fall in crude oil and other commodity prices. Among the Latin American indexes, the Brazilian BM&F Bovespa SA Index and the Argentina Merval Index fell by 1.9% and 1.7%, respectively, as of 3 PM ET.
Major Asian currencies extended their weak run against the US dollar on June 27, 2016. The US dollar and Chinese yuan currency pair was trading at 6.7 on June 27.
The PMI for June came in at 51.3, which was unchanged from the previous month and below the forecast of 52.0. The report indicated subdued growth in the service sector with job creation stooping to a one-and-a-half-year low.
The Brexit referendum triggered a huge global sell-off on Friday, June 24.
We believe the UK’s departure from the EU will be a long and complicated process as officials sort through UK and EU laws.
A weaker euro is likely over time. We also see pressure on European shares, credit and peripheral bonds.
The UK’s momentous decision to leave the European Union has both short- and long-term implications for investors around the world.
The IMF (International Monetary Fund) warned that the UK’s proposed “Brexit” could trigger a great depression in the UK’s economy.
The financial sector has contributed heavily to the UK economy. Financial institutions like HSBC and Barclays will face challenges doing business in the EU.
The EU’s light immigration laws allow young talent to work across the EU, but with more immigrants entering the UK, local citizens have less access to jobs.
On Friday, June 24, when the UK announced it would exit the EU, the pound fell to a 30-year low.
The UK’s declaration of its “Brexit” vote results caused major global markets to fall into the negative zone. But gold showed a different picture.
After the UK’s announcement of its decision to leave the EU on Friday, June 24, 2016, global markets showed a massive sell-off.
UK citizens voted to leave the EU, with 51.8% voting to leave, and 48.2% voting to remain. After the announcement, volatility increased in global markets .
US Treasury yields tumbled to new lows post-Brexit as market participants bought into the relative safety of US Treasury bonds.
As we discussed in parts 1 and 2 of this series, the magnitude of Friday’s cross-asset moves was remarkable.
The post-Brexit cross-asset volatility we saw on Friday is very likely to persist.