Market's evolution 20 of June to 24 of June 2016

Market's evolution 20 of June to 24 of June 2016


The week ended with the new about the departure of the United Kingdom from the European Union last Friday. The consequences were immediate and came accompanied by sharp declines within the major indexes. Now a long period of negotiations that could last a minimum of two years opens. With this, we maintain the outlook of instability due to the disagreement of Scotland with the outcome and the consequences that negotiations could lead to both regions.

In the background, appeared to be the second Spanish general elections, which resulted with the victory of the Popular Party with 137 seats followed by the PSOE with 85.

Regarding to the European Union, we kept hearing about the inability of the BCE to address the situation of low growth, low inflation and high debt. Nor should we lose sight to the weak consumer confidence and further declines in levels of PMI compound (now 52,8 compared with 53 expected).

The weekly closures, resulted in sharp declines during Friday despite the progress made throughout the week. The most punished selective was the IBEX35 with a fall of -6,87% (now at levels 7.787) after having fallen by 12% during Friday. The FTSE100 however, managed to close in positive with advances of +1,95%.

Throughout Thursday US jobless claims and manufacturing PMI levels were updated (both figures were better than expected with 259K new requests and the PMI at levels of 51,4).

Not that positive was the IMF report after cutting growth forecasts for the North American continent up to +2,2% from the previous figure of +2,4%. Moreover, markets have already ruled out a rate hike on July after the statements made by Janet Yellen in which the need for caution when raising rates were noted.

Taking into account this background, markets closed in the red with declines of -2% in the Nasdaq Composite and with a -1,63% in the S&P500.

According to Asia, it was in Japan, where the largest declines in retail sales were recorded, and although exports fell by -11,3%, the trade balance was better than expected (400.700 million JPY). However, manufacturing activity continued making improvements (while maintaining contractionary levels now at 48,8).

As for the foreign exchange market, the Brexit affected negatively the pound losing a -3,44% against the EUR. However, given the uncertainty about the consequences that the output of the UK might have on the rest of the EU, led the EUR to lose ground to its main pairs. Now, the EUR/USD trades around the 1,1115 after the fall of -1,41%. The JPY continued acting as a safe asset, scoring a +3,34% (now around the 113,52 EUR/JPY).

Without catalysts to boost the barrel of Brent, it closed the week around the 59,41 USD/Brent with cuts of -1,55%. The ounce of gold however, made new advances closing at levels 1,315 USD/Oz.