Tuesday, July 5: Five things the markets speak of
Post Brexit jitters this morning returned to the wrong book, by ending relief rally last week, and push the pound to a new two and a half year low against the euro.
today instigators are the new Standard Life Investments trading suspended in a large commercial real estate funds to UK due to investors pulling money after the vote for Britain to leave the EU. Coupled with a survey highlighting the fragility of the UK business confidence after the historic June 23 vote again creates a feeling of nervousness among global investors that any British when comes with a warning sign.
Bank this morning of England (BoE) report on financial stability will be key for traders and investors looking for clues on the response of the central bank to the impact of the vote Britain to leave the EU. Governor Carney has already mentioned last week the possibility of further monetary easing in the summer of the "Old Lady". Is the backup report personal comments Carney?
1. BoE warns against threats to financial stability
In its Financial Stability Review, has released ahead of the open stateside, the Bank of England (BoE) has highlighted a number of threats to the financial stability of the UK resulting from voting Britain to leave the EU.
Policymakers seem to focus on three key areas - real estate, employment and household finances.
The report highlights the possibility that capital inflows will continue to fall, which in turn will put "additional downward pressure" on the book and raise the cost of financing for companies UK. the most vulnerable sector, they identified commercial real estate. The BoE said it may open commercial real estate may be forced to sell assets to meet redemptions.
The BoE noted that some U.K. households will struggle to make debt repayments if an increase in unemployment after Brexit vote. U.K. policy makers are also wary that growth in the euro area and global economies may be weakened, which could hit demand for exports and U.K. affect some U.K. bank lending to borrowers outside the country.
in all, not a pretty picture for the BoE is painting and chances for further easing in August to continue the business.
2. Actions under pressure as investors turn cautious
Global equities and crude oil prices are under pressure in this shortened trading week stay. Risk aversion has gold ($ 1,347) and JPY (¥ 101.71) climb as investors turn cautious following the event last week.
The Stoxx Europe 0 is off 1% in early trade, building on yesterday as banking stocks losses fell for a second day. Energy and mining stocks also suffered as crude oil Brent fell 1.8% to $ 49.00 a barrel.
European bank shares are valued at levels that the "distress" signal. Since June 23, an index of European banks fell 17%, bringing total losses since the beginning of the year to 30%. main headache of Europe is now the Italian banks.
In Asia, the Nikkei Stock Average in Japan fell 0.7%, ending a winning streak in six sessions, the yen soared against the dollar. Hong Kong stocks fell 1.2% while Australian shares fell 1% after Reserve Bank of Australia (RBA) left its cash rate unchanged as expected (+ 1.75%).
Indices: Stoxx 50 -1.7% at 2,818, FTSE down 0.6% at 6,486, DAX -1.5% in 9563, -1.6% CAC-40 in 4167, IBEX-35 -1.8% in 8106, FTSE MIB -1.1% to 15,839, SMI -1.0% in 7975, S & P 500 Futures -0.6%
3. the yields of the euro zone to rise "temporarily" because of supply
the sovereign bond yields are trying to save in the euro area, the first time in a week, dealers fixed income make room to take down an additional € 20b of the bond offering. Before this week, global sovereign were under pressure, with a number of countries reporting record low yield impressions after the June 23 vote Brexit shock. U.S. 10 years hit new lows yesterday - the performance of the bid has fallen as low as + 1.382%.
Austria (+ € 1.1B issues today), Germany (holding a sale of two years tomorrow), Spain (potential new debt issuance to 10 years Thursday) and France (+ € 9 issues -10B long-term bonds Thursday) are all due to hold auctions this week. Bond yields have been subjected to extraordinary pressure of late, mostly on the back of dealers trying to get ahead of potential further easing from the European Central Bank (ECB) and the Bank of England (BoE ) in particular.
An example of witnessing volatility fixed income is Spanish debt. Bond yields to 10 years in Spain, which rallied after the UK vote as investors dumped risky assets, fell from -46 bps and even ended last week with their biggest weekly drop in nearly four years.
With a cheap funding costs is not really a surprise to see a race to bring supply on the market.
4. Aussie elections
Australia became the latest country plunged into political uncertainty after the general elections of last weekend delivered a result not conclusive. This raises the possibility of new elections.
Neither the Liberal-National coalition nor the opposition Labor Party won enough seats to form a government after the federal election Saturday. Aussie PM says Turnbull + 70% of the votes were counted and warned there would be a few days counting.
S & P has already hinted that it might cut the sovereign rating "AAA" if Aussie parliamentary impasse on the budget continues. Moody, the main risk for the sovereign rating Aaa "the country would come if the juror partly showed a lack of interest in returning the country's budget to a medium-term surplus. According to Fitch, the agency expressed concerns of a political stalemate in progress.
The RBA as expected, kept rates unchanged at + 1.75% and the policy statement was also left similar to the last meeting.
5. Swiss National Bank (SNB) The data suggest the currency intervention
There are no really a surprise to see the last of the Swiss national Bank (SNB) data suggesting that there was a good amount of currency intervention by the central bank last week.
the average sight deposits of domestic Swiss banks for the week ended July 1 was $ 430.3 billion +, + $ 423.5 billion against the previous week (June 24) and $ 416.5 billion the week + before.
notes, demand deposits are not a direct proxy, due to valuation effects, but dealers do not suggest a significant change is a strong signal of the intervention of the central bank. The SNB announced on June 24, a day after the vote of the shocking results of Brexit the bank intervened in the foreign exchange market to limit the increase in CHF - a familiar act by the SNB, but a shot needed through bow to this historic currency risk aversion choice ($ 0.9715).
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