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06 Jul 2016
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01 Jul 2016
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Indices Update

10 days since Britain voted to leave the EU and, contradictory to what everyone thought would happen, we are not living in post-apocalyptic wasteland – in fact we saw the FTSE 100 open at a 10 month high at the start of trading. However, with every silver lining there is a cloud; the drop in sterling does mean that the UK’s leading indicator is actually worth less than it was 2 weeks ago. 
Conversely, the FTSE 250 opened 0.5% down and is a far more of an accurate barometer of the UK economy. The fall was led by Clarkson, a global shipping firm, citing ‘global economic uncertainty’ as the reason behind their profit warning.

In general, international stock with large overseas earnings lead the stock market risers as the will undoubtedly benefit from the weaker pound. The fallers were led by UK housebuilders – as whispers of a recession made them hugely unattractive. 

The rise in the FTSE 100 slowly came under pressure as comments by Economist at Standard & Poor’s issued new warnings about Brexit; suggesting that the UK will barely escape a recession, GDP will be impacted and the BoE will drop rates to 0 by end of 2016, with QE restarting in 2017. In addition, weak UK Construction PMI figures showed that Britain’s building sector suffered its biggest slump in activity in seven years.  By the afternoon session the FTSE 100 fell from its 10 month high and 30 points in the red, ultimately closing down 55 points and the FTSE 250 dropping 2%. The DAX closed down, 0.69% led by Volkswagen along with other European indices.  US stock markets were closed on Monday for Independence Day. Trading is set to resume on Tuesday morning.

Equities

Top of the fallers yesterday were British Land and Persimmon PLC their shares were lower by as much as 7.15% and 6.82% respectively. Risers included miners Fresnillo, up 185p to 1895p, and Randgold Resources, up 385p to 9160p, clearly supported by gold prices. Shareholders of The London Stock exchange accepted terms of the merger with Germany’s Deutsche Börse. The deal looks like it will be finalized in the near future; both parties have insisted that the referendum has made no impact and neither party have been deterred by the result.  Moneystupermarket.com shares tumbled after Barclays released a statement saying “We believe Moneysupermarket.com offers attractive structural growth in the medium term. But our economists now expect a U.K. recession in 2017, and there is some cyclical exposure, which makes us cautious,” This caused the money comparison site to decline by 10.98%. 

Commodities Update

Silver is trading at 2 year highs as investors look to place money in safe havens. Silver jumped to $21 an ounce, but slid back early this morning to $20. Gains are attributed to speculation that central banks will increase stimulus following the Brexit vote.  Gold equally soared to a 2 year high in the previous session, but gains were given up early this morning as it failed to break a key resistance level. Spot gold was down 0.5 percent at $1,343.76 an ounce as of 0650 GMT.  A (very) short term correction is expected by analysts.  Brent dropped back below $50 per barrel as economic concerns became apparent; analysts suggest that crude demand may stall later this year. Barclays and JP Morgan released notes to clients citing global economic outlook pressures on oil prices. The world’s largest independent oil-trading firm, Vitol, also suggested that they do not see prices rising much further. 

Forex Update

GBPUSD crept higher early Monday to $1.3283, still 9% lower than pre-referendum levels. The rise was short lived as poor data showed Britain's construction sector PMI survey suffered its worst contraction in seven years in the run up to the vote to leave the European Union. However, with the US markets being closed for Independence Day, trading remained thin and help the currency pair inch up against the dollar.  Early Tuesday; Sterling hit a 2-1/2-year low against the euro and traded less than half a cent away from a 31-year trough versus the dollar in risk-averse markets, ahead of a financial stability review from the Bank of England.

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Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by Michael Campbell

Category: AM Bulletin


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