Market Talk — June 22, 2016

A mixed session in Asia as the Nikkei could not escape negative territory, whilst Shanghai and the Hang Seng both provided positive returns. The Nikkei lost 0.65% while Shanghai and HSI gained 0.95% and 0.6% respectively. The JPY flirted with a 105 handle but was rejected and that rejection has gathered pace as European equities stabled after a mid-morning wobble but more importantly, ahead of the BREXIT vote tomorrow.

As we approach this day of destiny many asking what will the BOE do, if anything? You can expect moves in accordance with varying rumours, views and headlines in all sterling related markets. The BoE is unlikely to address any large currency move, on the day but will be more concerned about bank liquidity and providing its reassurance, if required. It will not be so much the day or Fridays price action but the months and quarters ahead that the Bank of England will act – if anything. Late afternoon equity markets gathered confidence and we closed near the days highs. The result was that we saw around 0.5% gains for all core markets (DAX, CAC, FTSE and IBEX) even as Janet Yellen began day two of her address.

The US markets were pulled between and hesitant FED, weaker oil prices, strong Housing numbers and the eve of the BREXIT vote. People certainly went for caution as core US indices drifted and Treasuries were bid. 2/10’s were unchanged on the day with a 2bp parallel shift lower in yield. 10’s closed the day at 1.69% with the German Bund closing 0.06%. Italy closed 1.43% (-1bp), Greece 7.74% (+3bp), Turkey 9.38%, Portugal 3.11% (-3bp) and Gilts 10yr at 1.31%.

Markets are trading that the UK votes to remain as part of the EU, late this evening GBP is trading at the days highs of 1.4825. We will see how that pans out as the voting starts at 8AM tomorrow morning.