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 Tuesday 14 June 2016

PM Bulletin: European equities slide

 

 

European stock indices continued to come under selling pressure today. Investors are cutting back on their exposure to equities ahead of next week’s UK referendum on leaving the EU and as we face this week’s clutch of central bank meetings.
  
Of course, there are other issues to consider such as the prospect of a low growth, deflationary global outlook despite trillions of dollars-worth of central bank stimulus and the ongoing adoption of negative interest rates around the world.
  
Earlier today, German 10-year Bunds became the latest sovereign debt instrument to see yields turn negative. Investors are piling into bunds as a safety trade ahead of the referendum, but also as a vote of no confidence in the ECB’s ability to trigger inflation.
  
Tomorrow’s Federal Reserve meeting has lost much of its importance following the dismal Non-Farm Payroll release earlier this month. This time last week Fed Chairman Janet Yellen was somewhat guarded in a speech she gave in Philadelphia. However, she was seen as dialling back on expectations of a summer rate hike from the Fed. But the problem is that the Fed may be unwilling to provide much in the way of guidance tomorrow ahead of the UK referendum on EU membership next month. Consequently, this is set to be a nerve-wracking summer for investors.
   
The UK100 has had a torrid time since the middle of last week. Yesterday it scythed through support around 6,085 – the 0.62 Fibonacci Retracement of the Dec 2015-Feb 2016 sell-off. Today it broke below the 50% retracement of the same move. Of course, there will be winners and losers in the event of a Brexit with many UK multinationals set to benefit if sterling weakens further. But for now investors seem anxious to reduce their overall exposure and prepare to reposition themselves once the referendum result is known for sure. 
   PM Bulletin
  

David: There will be winners and losers in the event of a Brexit with many UK multinationals set to benefit if sterling weakens further
  
Disclaimer:
  
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 David Morrison

Category: PM Bulletin


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