On 28 June, 2016 – Markets rallied globally
Investors went bargain hunting and scooped up stocks as Brexit jitters calmed somewhat.
United States
US stocks followed Europe higher after a two-session rout triggered by Britain’s vote to leave the European Union. The Dow Jones industrials were up 1.6 percent, the S&P added 1.8 percent and the Nasdaq was 2.1 percent higher. Traders said there was a sense of calm returning after two swift sessions of losses.
In economic data, first quarter gross domestic product was revised upward to 1.1 percent annualized growth from the previous estimate of 0.8 percent. June consumer confidence increased to the highest level since October.
Energy stocks rose along with the price of crude oil Tuesday. Bank stocks, which had some of the biggest losses over the past two days, also rose. Exxon Mobil and JPMorgan Chase gained. Data storage companies Western Digital and Seagate Technology rebounded a day after posting big losses. Southwestern Energy along with Devon Energy and Cabot Oil & Gas advanced. Intercept Pharmaceuticals, Novavax and Ionis Pharmaceuticals rallied. Banks, airlines, railroads and semiconductor stocks also saw significant strength.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$14.85 to US$1,309.70. Copper futures were up 2.6 percent to US$2.18. WTI spot crude was up US$1.59 to US$47.92. Dated Brent spot crude was up US$1.43 to US$48.59. The US dollar was down against the euro, pound and the Canadian and Australian dollars. However, it advanced against the yen and Swiss franc. The Dollar Index was down 0.4 percent. The yield on US Treasury 30 year bond was down 1 basis point to 2.27 percent while the yield on the 10 year note was unchanged at 1.46 percent.
Europe
European markets rebounded from two days of sharp losses as the initial shock sparked by the UK decision to exit the Eurozone began to subside. Bargain hunters snapped up stocks at reduced prices. The pound sterling halted its recent plunge, but remains near its lowest level in three decades. The recovery today was broad based. Banks rebounded after Brexit concerns triggered heavy losses in the sector. Stabilization in commodity prices also provided a boost to energy and resource stocks. The FTSE and CAC added 2.6 percent, the SMI gained 2.4 percent and the DAX was 1.9 percent higher.
Fitch Ratings followed Standard & Poor’s Global Ratings and trimmed the UK ratings, but by one notch to ‘AA’ from ‘AA+’. Fitch said the uncertainty following the referendum outcome will induce an ‘abrupt’ slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment.
Volkswagen climbed on a report it has agreed to pay up to $14.7 billion to settle claims stemming from its diesel emissions cheating scandal. Banks Deutsche Bank, Commerzbank, Crédit Agricole, BNP Paribas and Société Générale rebounded from Monday’s losses. In Paris, Total gained after the company was chosen by Qatar Petroleum to operate the country’s biggest oil field for a period of 25 years. AstraZeneca jumped after the company announced that the European Commission has granted marketing authorization for its infection treatment.
Rolls-Royce Holdings advanced after saying its overall trading in the first five months of the year had been in line with expectations. Old Mutual was up after the financial services group confirmed it plans to separately float Old Mutual Wealth on the London stock exchange. Legal & General advanced after it said its balance sheet had proved resilient to the Brexit vote and it had trimmed its exposure to riskier assets beforehand. Aviva, Standard Life and Old Mutual also rallied.
Asia Pacific
Stocks were mostly higher as a rebound in oil prices, hopes for new stimulus measures from South Korea and Japan and growing expectations that the Federal Reserve will ease its monetary policy at its July meeting helped investors put Brexit worries on the back burner. Emerging market currencies along with the pound sterling recovered somewhat while gold futures declined on profit taking.
The Shanghai Composite added 0.6 percent after Premier Li Keqiang said the government would take measures to keep its financial and capital markets stable and avoid wild fluctuations. In its 2016 financial stability report, the People’s Bank of China said it would continue to implement prudent monetary policy and proactive fiscal policy. The Hang Seng retreated 0.3 percent.
The Nikkei edged up 0.1 percent after Economy Minister Nobuteru Ishihara said the government is willing to provide assistance to lessen the impact of the British referendum on small and medium-sized companies. After a meeting with Prime Minister Shinzo Abe and other members of his government, BoJ Governor Haruhiko Kuroda told reporters that the central bank remains ready to take whatever action it deems necessary.
The S&P/ASX and All Ordinaries were down 0.7 percent after US and European markets tumbled Monday, hit by another sharp drop in banking stocks as ratings agencies downgraded Britain’s credit rating. Energy and mining stocks were lower.
The Kospi added 0.5 percent and the local currency gained ground against the dollar after the government said it would draw up a 10 trillion-won supplementary budget to boost sluggish economic growth and cushion risks from the fallout of the EU referendum. The government also cut its GDP forecast for 2016 and said it expects inflation to average 1.1 percent in the year, slower than the 1.5 percent projected in December.
The Sensex was up 0.5 percent as sharp gains in the rupee as well as the preparedness of world central banks to support the proper functioning of financial markets helped to calm the jitters over the economic fallout of Britain’s vote to leave the European Union.
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*
Japan posts May retail sales. The UK reports May Nationwide house price index and M4 money supply. The Eurozone releases final economic sentiment data. In the US, May personal income and spending along with the pending home sales index and weekly EIA petroleum status report will be released.
*Note — all releases are listed in local time.
Source: Fidelity
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