Market's evolution 27 of June to 01 of July 2016

Market's evolution 27 of June to 01 of July 2016

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Once initiated the talks between the European Union and the United Kingdom, we have been following closely the statements made by the main leaders. By now, the group's position has remained solid about the conditions; both Merkel and Hollande clarified that the single market would be relegated to the maintenance of the agreement of free movement of persons in the country.

After the heavy falls recorded during the past week, markets seem to have regained the lost ground; with rises up to +6,18% in the IBEX35 and close to +4% in the EUROSTOXX50 (now at levels of 8.268 and 2.883 respectively).

And, despite the rebound made by the leading indicator of the manufacturing PMI from the Eurozone, we should not ignore the political and economic challenges that the EU has to face. According to studies made by Goldman Sachs, the probability of a recession over the next year would have increased. In the same line, UBS has downgraded GDP growth forecast up to +1,5%.

Regarding to the evolution of England, we have noticed improvements made in the sector of distribution and at growth levels during the 1T16, which has remained at +0,4 as expected. The pound lost ground against the EUR and now trades around the 0,8395 EUR/GBP. As for the forecasts, the Bank of England recognized last Thursday that there exist an economic downturn and announced immediate intervention through rate cut in the coming months. Likewise, the evolution will depend largely on the conditions imposed by the EU due to the strong dependence on the financial sector and export companies within its selective of reference. However, the FTSE100 rebounded a +7% during the week.

In the US the ISM manufacturing data surprised upwards (now at 53,5 compared to the estimated 51,1), factor that could anticipate further growth in the US manufacturing sector. Regarding rumors of recession, the US Treasury Secretary sent a message of calm in which ruled out any chance of developing new crisis.

From Asia, overcapacity concerns in China remained present, as well as debt and leverage. Analysts at Nomura decided to cut growth forecasts to +6%. Otherwise, in Japan, new alerts turned on after the fall in production levels, to which Kuroda responded by sending a message of reassurance confirming the implementation of the necessary measures.

The evolution of American and Asian selective was generally positive; both the S&P500 and the Nasdaq Composite noted advances of +3%, while the NIKKEI225 marked a rise of +4,90%.

As for commodities; the Brent closed the week at levels of 50 USD/Brent with increases of +4%, while the ounce of gold did with a rise of +2% around the 1,341 USD/Oz.