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AM Bulletin: Markets rise for the second day ; back to pre-referendum levels, sterling still weak
30 Jun 2016
AM Bulletin: Confidence returns – but for how long?
29 Jun 2016
AM Bulletin: The onslaught continues – and we’re not just talking the football
28 Jun 2016
Weekly Bulletin: Investors rattled by Brexit vote
27 Jun 2016
PM Bulletin: Brexit - Referendum fallout
24 Jun 2016
AM Bulletin: We’re out! And so is Cameron
24 Jun 2016
Video Update: #AskSpreadCo - EU referendum
23 Jun 2016
AM Bulletin: Markets on tenterhooks ahead of UK vote
23 Jun 2016
Spread Betting Tips
22 Jun 2016
AM Bulletin: Risk assets waft higher
22 Jun 2016
PM Bulletin:Referendum and Market Reaction
21 Jun 2016
PM Bulletin: Gold and the referendum
21 Jun 2016
AM Bulletin: Yellen testimony in focus
21 Jun 2016
PM Bulletin: Janet Yellen’s testimony
20 Jun 2016
Weekly Bulletin: It’s all about the referendum
20 Jun 2016
Market Info Update: EU Referendum Margin Changes - CFDs
17 Jun 2016
Market Info Update: EU Referendum Margin Changes - Spread Betting
17 Jun 2016
PM Bulletin: Forecasting the referendum result
17 Jun 2016
AM Bulletin: Central banks leave rates unchanged
17 Jun 2016
PM Bulletin: FOMC post-mortem
16 Jun 2016
AM Bulletin: Yen, precious metals soar post FOMC/BOJ
16 Jun 2016
PM Bulletin: FOMC look-ahead
15 Jun 2016
AM Bulletin: FOMC meeting ahead
15 Jun 2016
PM Bulletin: European equities slide
14 Jun 2016
AM Bulletin: Stocks down on oil, growth fears and UK referendum
14 Jun 2016
Weekly Bulletin: FOMC and BOJ meetings in focus
13 Jun 2016
PM Bulletin: Markets rattled by slide in bond yields
10 Jun 2016
AM Bulletin: European stock indices drift lower
10 Jun 2016
PM Bulletin: WTI at $50 – thoughts on US production
09 Jun 2016
AM Bulletin: Precious metals soar
09 Jun 2016
PM Bulletin: S&P closes in on all-time high
08 Jun 2016
AM Bulletin: Investors in limbo ahead of Fed and UK vote
08 Jun 2016
PM Bulletin: Yellen and the jobs data
07 Jun 2016
PM Bulletin: Fresh polls send sterling lower
06 Jun 2016
Weekly Bulletin: Rate hike? What rate hike?
06 Jun 2016
PM Bulletin: A dismal Non-Farm Payroll number
03 Jun 2016
AM Bulletin: Non-Farm Payroll Friday
03 Jun 2016
PM Bulletin: Non-Farm Payrolls look-ahead
02 Jun 2016
AM Bulletin: OPEC, ECB, key data releases and central bank speakers
02 Jun 2016
PM Bulletin: OPEC and the oil price
01 Jun 2016
AM Bulletin: Manufacturing PMIs in focus
01 Jun 2016
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Indices Update

It was another nervy trading day yesterday as investors and traders positioned themselves ahead of today’s UK referendum on EU membership. Stocks pushed higher yet again on expectations that “Remain” were set to carry the day. However, US equities suddenly sold off sharply on the European close. This followed the release of a poll from Opinium which showed a 1% lead for the “Leave” campaign with 9% undecided. The poll carried some weight with investors. Not only as it came so soon before polling began, but also as it had a larger than usual sample size.

However, there was a rebound in European equities and US stock index futures this morning as polls released overnight gave a slight lead back to remain. 

Taking all this together it’s worth bearing in mind the following from Professor John Curtice of Strathclyde University. Ahead of today’s referendum he said: "Anyone that wants to call this referendum with confidence is extremely foolish”. Professor Curtice is President of the British Polling council.

In other news yesterday US Federal Reserve Chair Janet Yellen gave her second day of testimony, this time before the House Financial Services Committee. Dr Yellen had already dampened speculation over a July rate hike during her testimony to the Senate Banking Committee the day before. In summary, Dr Yellen noted that economic growth has been “uneven” lately, and that payroll employment gains stepped down in April and May. Nonetheless, she remains “optimistic that we will see further improvements in the labour market and the economy more broadly over the next few years”. The FOMC will be watching the labour market data closely to “see whether the recent slowing in employment growth is transitory, as we believe it is”.

Yesterday Dr Yellen was at pains to reject the notion that the Fed has a "third pillar" of policy to keep stock market prices afloat. This followed a question from a member of Congress who asked if the US central bank's monetary policy was tied to boosting Wall Street's equity values. Dr Yellen insisted that it would be inappropriate for the Fed to target stock prices.

It is also worth noting that when questioned on Tuesday Dr Yellen said that she believes the Federal Reserve has the legal authority to charge negative rates, but that this approach would likely be very low on the list of options in the event of a downturn.

Earlier on Wednesday TV Tokyo aired an interview with Bank of Japan Governor Haruhiko Kuroda. Mr Kuroda said that the results of monetary and fiscal policies don’t always turn out as expected.

The FTSE 100 index closed up 76.5 points or 1.2% at 6,303

The German DAX rose 55.5 points or 0.6% to end the day at 10,071.1

The US30 closed down 48.9 points to finish at 17,780.8. The S&P 500 fell 0.2% to close at 2,085.5 while the Nasdaq 100 slipped 0.2% to close at 4,404.7


The big story in equities yesterday was the proposed buy-out of SolarCity (SCTY) by Tesla Motors (TSLA). The move was announced after Tuesday’s close and led to big moves in both stocks. In after-hours trade Tesla slumped around 11% while SolarCity was up over 16% at one stage. The proposed deal is somewhat controversial as Elon Musk is the largest shareholder in both companies. SolarCity has had a number of problems recently and some analysts have suggested that Tesla’s proposal is effectively a bail-out of the troubled solar panel company. It has been suggested that Tesla investors (who are backing breakthrough electric car technology) may be unhappy being lumbered with an energy solutions company. Elon Musk insisted that the new enterprise would be "the world's only vertically integrated energy company offering end-to-end clean energy products." 

Commodities Update

Crude continued to rally yesterday with Brent and WTI bedding in above $50 per barrel. Both contracts began to push higher at the end of last week, boosted to some degree by the general “risk-on” trade following a growing expectation that the UK will vote to stay in the EU. Late on Tuesday crude got an additional lift following the release of the latest inventory data from the American Petroleum Institute. This showed a drawdown of 5.2 million barrels (the biggest in six months) on expectations of a fall of only 1.7 million.

In addition, reports from Nigeria earlier in the week that the government there had signed a ceasefire with militant groups were denied. This provided further support for oil as any ceasefire which halted the continued sabotage of Nigeria’s oil infrastructure would lift production and weigh on prices.

However, yesterday afternoon crude pulled back sharply from its best levels following fresh inventory data from the Energy Information Administration. This showed a drawdown of 900,000 barrels for the week ending 17th June which was less than the 1.3 million barrel reduction expected.

Gold and silver were mixed yesterday as both markets consolidated following the steep sell-off earlier in the week. Investors had been busy cutting back their exposure to these perceived safe-havens following a definite poll shift towards the “Remain” vote in the UK’s referendum on EU membership. While most opinion polls still suggest the result is too close to call, this is a significant move from last week when “Leave” held a decent lead. However, there are still a large proportion of eligible voters (polls suggest as much as 11%) who remain undecided. This means turnout will be an important factor with a low turnout thought to favour a victory for the “Leave” campaign.

It’s possible that precious metals could fall further should “Remain” prevail on Friday morning. By the same token gold and silver look set to rally should there be a win for “Leave”, even by a small margin. However, it’s going to be difficult market to trade and we can expect increased volatility early Friday morning whatever the result of the vote. This could be particularly acute in precious metals as both will be trading on the low volume Asian Pacific exchanges as the results come through.

Forex Update

Both the euro and sterling rallied yesterday ahead of today’s referendum and that move has continued this morning. Cable flew above 1.4800 in overnight trade although it has since pulled back a touch. This time last week it came close to breaking below 1.4000. The GBPUSD sold off briefly yesterday following the release of an opinion poll which put both sides neck and neck. However, subsequent polls have favoured “Remain” although given the usual margin of error the result is still too close to call.

Investors are in the last stages of positioning themselves ahead of the vote. There can be little doubt that the market is pricing in a bigger likelihood of a win for “Remain” than for “Leave”. This is in line with the money being wagered with the bookmakers, but something of a gamble given the closeness of the opinion polls. Yet many analysts still believe sterling will rally further if the UK votes to remain a member of the European Union. This seems possible if we assume that the Brexit risk began to get priced in to markets around December last year when cable was trading around 1.5000. However, it’s worth remembering that the UK has the biggest twin deficit (current account and budget deficits) in the OECD. So at some stage any knee-jerk relief rally could quickly lose its puff. 

Upcoming events

The polls are now open for the UK referendum on EU membership and close at 22:00 BST. Today’s other significant data releases and events include French, German and Euro zone Manufacturing and Services PMIs. From the US we have Weekly Jobless Claims, the Flash Manufacturing PMI and New Home Sales.


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Posted by David Morrison

Category: AM Bulletin

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