27.06.2016 - The consequences of the British referendum remain in the spotlight
US stock indexes have shown a sharp decline on Friday in connection with the unexpected outcome of a referendum on Britain's membership of the EU. As a result, a majority supported the country's exit from the largest economic bloc in the world, which significantly increase the demand for defensive assets and has led to selling on the stock market. It is worth noting that the US indices were near historic highs and needed a significant incentive for continued growth. Support for the stock market may be decline in probability of the Fed raising interest rates this year. According to our estimates, investors will continue to fix long positions in the coming days. Today, the dynamics of trading will affect the news on the US trade balance (12:30 GMT) and the service PMI (13:45 GMT). We maintain a negative outlook for the near future.
European stocks today show little change after fell sharply on Friday. As a result of the victory of eurosceptics on the referendum on membership of the UK in EU, the GDP growth in the region may slow down and political risks continue to rise against the backdrop of the possible exit of Scotland from the United Kingdom, as well as the growth of negative sentiment about the EU in the countries of the union. It should be noted that the petition on the need for another referendum in the UK received more than 3 million signatures and speculation on this issue will keep volatility high. Today, in the focus of investors will be the speech of the ECB President Mario Draghi (17:30 GMT). Our forecast for the near future is pessimistic and we expect saving of high level of volatility on the market.
Major stock indexes in Asia and the Pacific showed growth. Support for the Japanese market was a decrease in the price of the yen after it has greatly strengthened on Friday amid increased interest in defensive assets. In addition, the markets calmed after the statement of Prime Minister Shinzo Abe on the instruction to use foreign exchange intervention to deal with the instability on the market. We recall that the price of the yen has a strong influence on the economy of an export-oriented Japan. Profits of major industrial enterprises in China increased by 3.7% in May compared with the same month of the previous year, which was 0.5% less than in April. We expect continued high levels of volatility on the markets of the region and the probability of decline remains high in the near future.