Weekly market review
Week ending 24 June 2016
Global equities sharply sold off following the UK’s referendum vote to leave the European Union (EU), a surprise result which bucked signals from betting markets and polling data earlier in the week. As a result, the UK stock market dived on Friday, although it subsequently recovered to end the week at a modest fall, closing at 6,170. Investors fled from risk assets, with the US stock market and the Euro Stoxx 600 index falling 1.6% and 1.1% respectively. The largest decliners in the indices were concentrated in the financials sector, as UK-based banks and their investors evaluated how the vote will change their business.
US Treasury and high-quality sovereign debt yields tumbled as investors shunned risk assets. The US 10-Year Treasury yield hovered near 4-year lows, closing at 1.6%. The UK 10-Year government bond yield hit an all-time low of 1.02%, while yields on the Continent also moved lower, guided by a negative 10-Year German Bund yield of –0.05%.
Safe-haven currencies soared following the referendum vote, with the US dollar up 1.1% and the Japanese yen hitting ¥99.2, ultimately finishing 2.5% stronger over the week. Following significant appreciation leading into the vote, the British pound closed down 5.5% on the week. Further strengthening in risk-off currencies has fuelled speculation around currency intervention, with the Swiss National Bank intervening on Friday to stem upward pressures.
West Texas Intermediate crude oil followed the sell-off of other risk assets and stronger dollar, dropping to $47.64/barrel. Heightened geopolitical changes have increased uncertainty of future oil demand.
Source: Goldman Sachs Asset Management. Adapted by FundCalibre. This material is for information purposes only and does not in any way constitute financial advice.
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