Incisive market commentary from David Morrison

Stay ahead with our market commentary and webinars from our in house market strategist

Open a Live AccountOpen a Demo Account
+ Show blog menu



Expand 2017 <span class='blogcount'>(348)</span>2017 (348)
Collapse 2016 <span class='blogcount'>(483)</span>2016 (483)
Expand December <span class='blogcount'>(23)</span>December (23)
Expand November <span class='blogcount'>(41)</span>November (41)
Expand October <span class='blogcount'>(37)</span>October (37)
Expand September <span class='blogcount'>(41)</span>September (41)
Expand August <span class='blogcount'>(52)</span>August (52)
Expand July <span class='blogcount'>(38)</span>July (38)
Collapse June <span class='blogcount'>(42)</span>June (42)
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
Expand May <span class='blogcount'>(42)</span>May (42)
Expand April <span class='blogcount'>(45)</span>April (45)
Expand March <span class='blogcount'>(41)</span>March (41)
Expand February <span class='blogcount'>(42)</span>February (42)
Expand January <span class='blogcount'>(39)</span>January (39)


As expected, volatility has picked up as we approach Thursday’s UK referendum on EU membership. Yesterday European stock indices surged higher following a batch of weekend polls which put into question the lead of the “Leave” campaign over “Remain”. Certainly, the “Leave” campaign appears to have lost its upside momentum. This could be due to complacency given the consistent lead the leavers maintained up until the end of last week. It could be that the appalling murder of MP and Remain campaigner Jo Cox has had an influence. It may be that Remain’s “Project Fear” (an even clumsier version of Bill Clinton’s 1990’s battle-cry - “It’s the economy, stupid!”) is having an effect, or that the “Leave” focus on immigration is turning people off. Whatever the reason, according to the latest opinion polls there’s little to put between the two sides (although it’s worth remembering that there are a significant number of potential voters who are still undecided).
Yet the market reaction over the last two days would suggest that a “Remain” win is in the bag. That’s not to say we won’t get a continuation of a “risk-on” move if the UK votes to stay in the EU. But it may end up being less extreme and shorter-lived than it would have been had the vote been held this time last week. The prevailing view seems to be that any “Leave” poll lead now won’t be big enough to indicate a win on referendum day as most people still undecided who turn up to vote are probably more likely to back the status quo, such as it is.
So what about gold?
Gold has fallen sharply today in a continuation of a move that began on Monday. As with other risk assets, this has been a result of repositioning as a “Remain” win looks the most likely outcome from Thursday’s referendum.
  PM Bulletin
Gold has now pulled back significantly from the near-two year high it hit in the middle of last week. However, it has still had a strong run so far this month having reversed the losses it suffered back in May. These gains followed the dismal Non-Farm Payroll in earlier this month. The poor data has pushed back expectations for tighter monetary policy from the Fed this summer. This was confirmed last week when the US central bank held off from hiking rates and downgraded their outlook for US economic growth. There is still an expectation of one or perhaps two rate hikes this year from the Fed, according to its latest Summary of Economic Projections. However the market view is considerably more dovish.
There has been renewed interest in gold as it appeared to bottom out in December following a four and a half year bear market. It has come back into favour as an increasing number of government and corporate bonds now trade with a negative yield, so making it increasingly attractive despite yielding nothing. It has also made gains as investors have raised their holdings as a response to increased global risks and uncertainty. The UK’s referendum is a part of that. So, while gold looks set to rally on a Brexit vote, there could be plenty of downside on a vote to remain. How much? Who knows? My biggest worry is that the bulk of the results come out during the Asian Pacific trading session when liquidity is already pretty shallow. Consequently, there’s the danger of a disorderly move in either (or both) directions. I hope we don’t get any stupid “flash crash “market moves which are quickly reversed. That kind of thing just destroys market confidence. But I wouldn’t bet on it not happening. 
In conclusion: this week’s market moves suggest that investors expect the UK to vote to stay in the European Union. If this is correct, then we can expect a continuation of the relief rally in global stock indices and sterling, and a sell-off in precious metals, bonds and other perceived “safe havens”. But whether this will build enough momentum to carry on through the summer is another matter entirely. In contrast, the odds have widened significantly on a Brexit. In consequence, and in contrast to a “Remain” vote, the market reaction to a “Leave” vote is likely to be both violent and protracted.
David: I hope we don’t get any stupid “flash crash” market moves which are quickly reversed. That kind of thing just destroys market confidence.
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

Add a comment Add comment            


© 2018 Spread Co Limited. All Rights Reserved.

Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

Spread betting and CFD trading are leveraged products and can result in losses that exceed your deposits. Ensure you understand the risks.

Losses can exceed deposits. Click here to learn more.