On 20 June, 2016 – It is all about the Brexit vote
Stocks rallied globally after UK polls indicated a preference for remaining part of the European Union.
United States
US stocks followed shares in Asia and Europe higher in a relief rally as investors’ fears of Brexit retreated and the UK would remain in the European Union. The Dow Jones industrials were up 0.7 percent, the S&P gained 0.6 percent and the Nasdaq was 0.8 percent higher.
Consumer stocks gained as investors bet people would spend more on shopping and travel. Amazon advanced as did Priceline and Nike. Bank of America and Wells Fargo rallied. Adobe Systems, which will report its second-quarter results on Tuesday, was higher. eBay and Intel also advanced. Chevron and EOG Resources closed higher. General Electric, Boeing and Honeywell climbed higher. FedEx rose after the federal government moved to dismiss charges. Prosecutors had planned to charge FedEx with knowingly delivering illegal prescription drugs to dealers and addicts, but late Friday the government dropped the case.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$8.90 to US$1,281.80. Copper futures were up 1.8 percent to US$2.09. WTI spot crude was up US$1.21 to US$49.19. Dated Brent spot crude was up US$1.26 to US$50.43. The US dollar was down against the euro, pound, yen and the Canadian and Australian dollars. However, it advanced against the Swiss franc. The yields on both the US Treasury 30 year bond and the 10 year note were up 6 basis points to 2.48 percent and 1.67 percent respectively.
Europe
European markets rallied after recent poll results eased concerns over a possible “Brexit.” These were the first opinion polls on the EU referendum since the killing of MP Jo Cox. The polls showed a shift among British voters towards the “Remain” camp. While the issue is still too close to call ahead of Thursday’s referendum, the perception among investors appears to be that the “Leave” camp has lost the momentum they had built up in recent weeks.
Bank stocks advanced after having been among the hardest in recent weeks due to the threat of a potential Brexit. The FTSE jumped 3.0 percent, the CAC gained 3.5 percent, the DAX advanced 3.4 percent and the SMI added 2.4 percent.
HeidelbergCement jumped after the company said it has received approval from the US Federal Trade Commission for closing its merger deal with Italcementi SpA. Volkswagen surged. Bloomberg reported that the company will submit its $10 billion plan this month to fix a half-million emissions-cheating cars or get them off US roads even though it is waiting for regulators’ sign-off on how to retrofit the vehicles. Bayer advanced on a Reuters report that the company is exploring the sale of its radiology supplies unit. Deutsche Bank and Commerzbank climbed.
Utility RWE and E.ON were higher. In Paris, Ubisoft Entertainment soared after Vivendi increased its stake in the company. BNP, Crédit Agricole and Société Générale finished higher. GlaxoSmithKline gained after reporting positive top-line results from the phase III FULFIL study of a lung drug. Lloyds Banking Group, Barclays, Royal Bank of Scotland and Standard Chartered climbed in London. Homebuilders turned in a strong performance with Berkeley Group, Taylor Wimpey, Barratt Development and British Land finishing higher.
Asia Pacific
Stocks rallied Monday as worries over a potential British exit from the European Union receded and a weaker dollar supported commodity prices. Safe-haven assets and currencies like gold, government bonds and the yen retreated after three opinion polls on the EU referendum suggested the ‘Remain’ campaign is pulling back into the lead following the murder of pro-EU MP Jo Cox.
The Shanghai Composite edged up 0.1 percent as concerns about yuan depreciation and a fresh regulatory crackdown on shell companies raising funds from external sources in backdoor listings offset positive home price data. The Hang Seng added 1.7 percent.
The Nikkei gained 2.3 percent thanks to a weaker yen. Investors shrugged off the May merchandise trade deficit. Both exports and imports declined from a year ago. Among the companies that advanced were Fanuc, Sharp, Panasonic, Sony, Toyota, Hitachi, Nissan Motor and Mazda Motor. Inpex, Fast Retailing and J Front Retailing also were higher.
The S&P/ASX gained 1.8 percent and the All Ordinaries was up 1.7 percent. The big four banks were up. Miners BHP Billiton, Rio Tinto, Fortescue Metals Group, Woodside Petroleum, Origin Energy and Santos jumped all rallied. Retailers Wesfarmers and Woolworths also advanced. Shipbuilder Austal was up after it won two contracts worth a total of A$29 million to build commercial passenger ferries. However, weaker gold prices weighed on gold miners, with Northern Star Resources, Newcrest, Evolution Mining and Regis Resources all retreating. Healthcare giant CSL and Cochlear dropped as the Aussie dollar rallied above 74 US cents.
The Kospi was 1.4 percent higher. The Sensex gained 0.9 percent after shrugging off early losses as easing Brexit worries and a weaker dollar on the back of dovish comments from a Federal Reserve Official helped outweigh apprehensions that Raghuram Rajan’s departure from the Reserve Bank of India could weaken the rupee and trigger capital outflows.
Global Stock Markets
Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Minutes of the most recent Bank of Japan and Reserve Bank of Australia monetary policy meetings will be published. UK public sector finances and CBI industrial trends survey will be reported. The ZEW survey for Germany will be released. In the US, Fed Chair Janet Yellen gives her first day of Congressional testimony to the Senate Banking Committee.
*Note — all releases are listed in local time.
Source: Fidelity
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