tock markets around the world surged higher for a second straight day on indications that cooler heads may prevail and that officials are favouring an orderly move toward Brexit. Two representatives of the ECB reminded the world that Brexit “is not a Lehman Brothers event” and also indicated that while the ECB stands ready to intervene if needed, nothing immediate is planned. The longer we go without central bank intervention, the more confidence can be restored.
The EU held its first summit meeting with two significant results. First, the EU committed to an orderly process but also called on the UK to get things moving once a new PM and Cabinet are in place. Second, Spain voiced significant opposition to talks with Scotland, fearful of boosting its own separatist parties. Spain indicated Scotland would have to leave with the UK and would not get a free pass back into the EU, cutting speculation that the UK leaving the EU could lead to its own breakup. The ECB set its next summit for late September, confirming nothing is likely to happen over the summer with the UK focused out on sorting out its own leadership.
On these developments, which indicate nothing is likely to happen over the summer until the Conservatives (and possibly Labour as well) bring in new leaders in September. The FTSE soared 3.6% to close above 6,300 and near the top of this year’s trading range. European indices rose at a slower pace with the Dax
rising 1.75%. US indices rose 1.3%-1.7% led by gains in Energy and Financials.
Bank stocks had been hit particularly hard in the wake of the Brexit vote so it’s no surprise that they bounced back strongly as the panic faded. Today, Canada’s CIBC announced the acquisition of PrivateBancorp in the US indicating confidence that Brexit won’t spark a global financial crisis. It also reminded the street that stocks falling too far relative to fundamentals could become takeover targets.
Energy stocks also rallied Thursday as crude and WTI gained 2.9% and took another run at $50.00/bbl. DOE oil inventories fell 4.0 mmbbls last week confirming the last two big drops in API inventories.
Currency action saw GBP continue to recovery against USD, JPY and EUR, while USD dropped back as soft personal income and pending home sales suggested the Fed may remain on hold longer (some traders may also be expecting a rate cut but this looks unlikely due to the presidential race unless things really go off the rails). NOK outperformed CAD to the upside gaining an extra boost on top of the oil price from easing Europe fears.
Looking forward, Japan data week continues today with industrial production and housing reports and tomorrow with employment and the quarterly Tankan business survey. GDP reports for Canada and the UK could attract some attention although as with the US today, traders are more focused on more recent information. Focus later tomorrow and into Friday may then turn to manufacturing PMI reports from around the world which may give the first indications of what impact if any the close Brexit race may have had on different economies around the world in June.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US DOE crude oil inventories (4.0 mmbbls) vs street (2.5 mmbbls)
US DOE gasoline inventories 1.3 mmbbls vs street (0.3 mmbbls)
US personal income 0.2% vs street 0.3%
US personal spending 0.4% as expected vs previous 1.0%
US core PCE inflation 1.6% as expected
US pending home sales 2.4% vs street 4.6%
UK Nationwide house prices 5.1% vs street 4.9%
UK mortgage approvals 67.0K vs street 65.3K
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
9:50 am AEST Japan industrial production street 1.9%
3:00 pm AEST Japan housing starts street 4.8%
3:00 pm AEST Japan construction orders previous (16.9%)
11:00 am AEST NZ ANZ activity outlook previous 30.4
11:00 am AEST NZ ANZ business confidence previous 11.3
7:00 am BST Germany retail sales street 2.5%
8:55 am BST Germany unemployment change street (5K)
8:55 am BST Germany unemployment rate street 6.1%
9:30 am BST UK GDP update street 2.0%
10:00 am BST Eurozone consumer prices street 0.0%
10:00 am BST Eurozone core CPI street 0.8%
10:00 am BST Greece retail sales previous (4.3%)
8:30 am EDT US jobless claims street 267K
8:30 am EDT Canada April GDP street 1.4%
8:30 am EDT Canada industrial prices street 0.3%
8:30 am EDT Canada raw material prices street 5.0%
9:45 am EDT US Chicago PMI street 51.0
10:30 am EDT US natural gas storage street 46 BCF
1:30 pm EDT FOMC Bullard speaking
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