The problem with writing anything about the markets and Brexit is 48 hours later it can look out-of-date but here it goes.
UK:Bank of England Mark Carney’s latest post Brexit speech hinted at near-term easing by the BoE. UK equity markets welcomed the stimulus possibilities with the FTSE 100 hitting a 10-month high at 6,500. Note: the wider FTSE All-share market is still below pre-Brexit vote levels as it is not protected by the international nature of companies in the FTSE 100.What Brexit means for the wider industrial base in the UK is far from clear.
UK Government bonds / GILTS also liked the news with the 10-year government bond falling to record low yields at 1.00%
Europe: Brexit is far from a domestic event as there are dangers to global as well as European economic growth as Brexit creates uncertainty by definition. European bond markets are also seeing record low yields right now with many short maturity government bonds trading at negative yields reflecting their ‘safe haven’ status. European equity markets have similarly been boosted by hopes for further central bank stimulus measures.
US: The US stock markets have also rebounded over the past week with the S&P 500 now at 2,089 – trimming its post Brexit vote decline to 1.1 %.
Commodities: Commodities have rebounded hugely from Q1 lows with copper, for example, now trading at an 8 week high. Oil remains stable at just below $50 per barrel and gold similarly calm at $1,310 an ounce with the latter having benefitted over the last few weeks as an alternative ‘safe haven’ investment to government bonds.
Currencies: The The British pound has sold off sharply on the Brexit news and eased also in response to Mark Carney’s latest remarks. GBP versus USD, or ‘cable’ as it is known in the markets, is currently trading at 1.33 ( $ per £) down from approximately 1.5000 before the Brexit result was announced. This should make life for UK exporters easier but that all depends on what trade deals are struck with our trading partners in Europe and around the globe.
Note: A weaker exchange rate is an inflationary factor, all other things being equal, as many raw materials and food items are imported from overseas. Future inflation levels, however, will more likely depend on economic growth levels and consumer confidence as Brexit develops. Exciting and volatile times.
Equities
S&P 500: 2084
Nasdaq: 4820
FTSE 100: 6504
Bonds – 10 Year Government Yields
US 1.46%
EU -0.13%
GB 1.00%
Foreign Exchange
EUR/USD 1.1100 (1 euro buys 1.1100 dollars)
GBP/USD 1.3370 (1 pound buys 1.3370 dollars)
Commodities
OIL: Brent: 49.00 (dollars per barrel)
GOLD: 1310 (dollars per ounce)
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Paul McCormick
