The story of June has certainly been the US -Europe- Asia trade wars which were instigated by Trump administration back at the start of the month. The tariffs of 25% on Steel and 10% on Aluminum likely to affect around 100 Bn worth of goods globally. China and Europe since retaliated, with Europe initiating a tariff on US goods such as motorcycles, T-shirts, Cigarettes and Whisky which comes in to play on the 1st of July. So, it was natural to see Market volatility in June, today was no different with Asia shedding some points, The Hang Seng index is down more than 6% year to date, one of the worst performing indices globally. The confidence this month has generally dipped globally, US CB consumer confidence index posted yesterday down from 128.6 to 126.4.
Within Europe the FTSE rebounded slightly up 80 points from yesterday’s 170 point loss, GBPUSD also is flirting with the 1.31-1.32 range ahead of todays speech with Mark Carney BOE chairman. Mr. Carney raised questions over EU’s readiness over a hard BREXIT. But he did mention that the UK banks were fit to handle such a scenario. But the overall sense from the markets was that he failed to give hope that rates would be raised come August which took the GBPUSD lower in the afternoon session. The pound is currently down 0.4% against the USD and 0.2% against the EUR.
Its been a year and a few days since the BREXIT vote was cast, MP’s recently had a vote to determine whether they had a say in the BREXIT negotiations. This was voted in their favor. Teresa May is expected to have some sort of formal arrangement with the EU towards the fall of this year. Still nothing is concrete as to what is owed to who (the divorce bill). The same kind of blackmailing news we heard from the Scottish independence votes, where a series of UK companies stated they wouldn’t remain in Scotland if they sought independence. This time it is BMW doing the same to the UK, claiming that they could close the UK factories if BREXIT causes delays to importing components.
The DAX index one of Europe’s poor performers since the start of the year, rebounded up close to 1% but is still down 4.41% for the year. Same couldn’t be said for the countries performance in this year’s world cup, crashing out today at the group stages for the first time since 1938.
Tomorrow we have the start of the EU leaders summit where they will attempt to strengthen the bloc’s military cooperation to an effort to reduce reliance on the US. Leaders are claiming that Europe must take a greater responsibility for its own security, could be prompting the way for a European military perhaps and thus introducing European Debt to equate to that of the Federal debt? The main topic of the EU summit is with the Migrant issue, with the group already meeting last Sunday in a mini meeting to reach a compromise between the nations. Italy PM Conte, stating migration is a threat to the freedom of travel within the EU. Perhaps we could also be heading leaders tearing up the Schengen agreement.
The US markets started lively but trundled down to the close of the day. With all the main three (DJIA, SPX 500 and NASDAQ 100) indices going negative. The VIX made a 12% move up and is now at 17.73. OIL made a decent 1.72 $ move which is finding itself to be closed at 72.25. There are talks emerging between Russia and the US on how to tackle Iranian sanctions and how to take the oil of the market. Some experts believe this is an impossible task. Tomorrow we have the US GDP figures to look out for, with QoQ growth expected to signal 2.2%.
In the crypto space, BTC hit fresh lows diving into the 5000 region, before bouncing back closing above the 6000 mark, but still down 1.64% at the time of writing.
Japan 0.02%, US 2’s closed 2.52% (u/c), US 10’s 2.87% (u/c), US 30’s 3.02% (u/c), Bunds 0.32% (-1bp), France 0.71% (u/c), Italy 2.80% (-2bp), Greece 3.96% (-8bp), Portugal 1.82% (u/c), Spain 1.35% (+1bp), Turkey 16.27% (+1bp) and Gilts 1.24% (-6bp).