Monday, June 20, 2016

Markets soar on changing attitude for Brexit vote

Dow shot up 253, advancers over decliners 6-1 & NAZ rose 74.  The MLP index went up 2+ to the 209s & the REIT index gained added 3 to 350 (not far from its record highs).  Junk bond funds were higher & Treasuries sold off.  Oil surged (see below) & gold gave up some of the recent advance.

AMJ (Alerian MLP Index tracking fund)

Crude Oil   48.91    0.93 (1.94%)

Gold     1,282.60    -12.20 (-0.94%)

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Global equities rallied & the £ strengthened the most since 2008 on signs the campaign for the UK to stay in the EU was gaining momentum before this week's referendum.  The S&P 500 jumped 1%, the Stoxx Europe 600 Index headed for its biggest gain since Aug & emerging-market shares advanced as a poll showed Britons favored remaining in the EU.  The £ jumped 2%, Spanish bonds gained & credit risk fell the most since Mar.  Oil rallied with industrial metals.  The yield on 10-year Treasury notes jumped 6 basis points when note were sold.  Global equities have rebounded from a 4-week low as riskier assets gained, after bookmakers' odds suggested the chances of a “Leave” vote faded since the murder of a pro-European lawmaker on Thurs.  A poll over the weekend showed 45% of voters backed the ‘Remain’ camp, while 42% were in favor of a Brexit. 

Stocks Surge Around the World as Brexit Risk Diminishes

Oil rallied, lifted by a wave of investor confidence & a weaker $ after polls showed a diminishing chance that Britain may vote to leave the EU.  Campaigning for Britain's vote on EU membership resumed on Sun after a 3-day hiatus prompted by the killing of a pro-EU lawmaker.  3 opinion polls vote showed the 'Remain' camp recovering some momentum, although the overall picture remained one of an evenly split electorate.  Investment safe havens such as gold, the $, German bonds & the Swiss franc came under pressure, while oil looked set for its largest 2-day rise in a month.  Oil prices continued to recover despite data showing US energy firms adding oil rigs for a 3rd week in a row, suggesting higher production to come.

Oil Rallies as Fears Over Brexit Abate

Russian consumer spending failed to pick up in May even as the labor market & wages fared better than forecast, adding to evidence that inflationary pressures will remain subdued as the economy emerges from its longest recession under Putin.  Retail sales plunged 6.1% from a year earlier after a revised 4.9% drop in Apr, the Federal Statistics Service said.  The estimate was for a decrease of 4.8%.  The jobless rate fell more than forecast, dropping to 5.6%, the lowest in 7 months, while a decline in real wages unexpectedly improved to 1%.  Growing confidence by the Bank of Russia that the economy is moving past the crash in oil prices & a bout of inflation prompted policy makers to reduce borrowing costs in Jun for the first time in almost a year.  While the central bank stopped short of signaling the start of a new easing cycle, it said rate setters will “consider the possibility” of further decreases if inflation is in line with forecasts & based on estimates of risks to price growth.  The ruble has appreciated more than 15% against the $ this year after a 20% loss in 2015.  Households endured the brunt of Russia's recession after authorities responded to the collapse in crude prices with spending cutbacks & allowed the ruble to weaken.

Russian Consumer Demand Wobbles as Pressure on Inflation Subdued

Risk investing is back in vogue as the Brexit vote looks like Britain will remain in the EU.  However polls suggest this is still a close call & with more campaigning this week, it is far from certain.  It is unclear how much such a vote will affect the EU economy which is stumbling.  But traders are happy & will carry the day.  Tomorrow is a new day.

Dow Jones Industrials


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