Trading this week is likely to be dominated by the Brexit vote and this morning looks no exception. Markets look set for a positive open in response to weekend polls on the Brexit vote suggesting the “Remain” vote margin has improved. This has seen the betting odds for the leave vote move out to 9/4 and implies only a 30% probability that Britain will vote to leave the EU.
This morning has seen markets reducing the risk premium for Brexit. Gold and the Japanese Yen have been sold while the Euro has been bought. These moves suggest a positive session for stock markets when they open this morning. Traders will be looking to get ahead of the curve, increasing their allocation to equities now that the chances of a leave vote seem reduced.
Although we are likely to see some move in a risk on direction today, the market will remain much attuned to the risks of volatility around the Brexit Vote for the remainder of the week. In a very fluid situation, traders and investors will be reluctant to put too much faith in fluctuating pre vote polls and betting markets. Markets are likely to leave at least some risk premium in valuations until after the Brexit vote.
The weaker $US this morning is supporting commodity prices and is likely to improve trader appetite for resource and energy stocks.
Metcash managed a 1.4% increase in like for like sales in IGA supermarket stores. However, as expected this has come at the cost of a substantial cut in margins due to price competition. This is an industry where management needs to be at the top of their game to produce acceptable outcomes in a very challenging competitive environment.