Tag Archives: Brexit

In Brexit month, investors dump shares, flee for safety of cash

A man is reflected in an electronic board showing the graph of the recent fluctuations of the TOPIX

By Sujata Rao

LONDON (Reuters) – Global investors bought real estate, added to cash holdings and cut equity allocations to the lowest in at least five years as this month’s shock Brexit vote added to an already toxic mix of sluggish world growth and volatile markets.

The monthly Reuters survey of 44 fund managers and chief investment officers in the United States, Europe, Japan and Britain was conducted between June 15-29, straddling the June 23 referendum in which Britons voted to leave the European Union.

The verdict, which drove sterling to 31-year lows and wiped $2 trillion off world stocks, heralds intense political and economic uncertainty for the UK, with likely repercussions for the euro zone as well as the rest of the world.

Close to two-thirds of poll responses were received after the vote, but many of those who responded beforehand said they had positioned defensively, given the uncertainties already roiling world markets.

This includes the looming U.S. presidential election which could bring victory for Republican Donald Trump – an outcome that two-thirds of those who responded to a special question said would have negative consequences.

Allocations to cash stood at 6.8 percent on average, having risen every month since February and the highest since last June, the survey showed.

In almost every region, investors dumped shares, with the average global holding at 45 percent, the lowest since before May 2011 at least and down from nearly 50 at the end of last year.

European funds’ equity allocations hit the lowest in over four years.

“We expect a risk-off attitude in financial markets to continue as investors digest the potential impact of Brexit and as geopolitical risks remain high,” said Matteo Germano, global head of multi-asset investments at Pioneer Investment.

Germano predicted a knock-on hit to commodity prices, while gold and U.S. Treasuries benefited. On equities, European and UK-focused stocks warranted caution, he said, adding:

“With increased geopolitical risk in Europe, the U.S. dollar should behave as a safe haven.”

Year-to-date, euro zone and UK stocks have lost some 10 percent and U.S. equities are just 2 percent in the black – a consequence also of stubbornly weak economic growth, U.S. rate rise expectations and fears of a sharp slowdown in China.

However, many investors noted that equity markets worldwide were already starting to claw back Brexit-fueled losses.

“Unquestionably, we have seen an extraordinary amount of money withdrawn from the global equity markets on Brexit worries,” Peter Lowman, CIO at Investment Quorum, a UK wealth manager.

But it was not “a Lehman moment”, he said.

Portfolios at HFM Columbus Asset Management were positioned cautiously, its investment director Rob Pemberton said, citing “more global concerns – global growth, Fed monetary policy, China.”

Property as an asset class was also in demand, its weight rising to 2.9 percent, also the highest in at least five years.

Bond allocations rose slightly to 38.1 percent.

TRUMP IMPACT

The full impact of Brexit is likely still ahead, as there is little certainty over when proceedings will formally begin to divorce the country from the EU, and how long they could take.

But even in the run-up to Brexit, investors were fretting about another potential speed bump – U.S. elections and the possibility of a Trump win.

Many say his proposals for reshaping the trade and diplomatic ties of the world’s largest economy, his anti-immigration rhetoric and questions about Treasury obligations create as much market uncertainty as the Brexit issue.

Asked how a Trump presidency could impact U.S. and global equities, two-thirds of those who replied saw it as negative. Some also cited fears that a Trump win on the heels of Brexit could encourage populist parties across Europe.

A Trump win would “increase the geopolitical risk at a worldwide level”, said Nadege Dufosse, head of asset allocation at Candriam.

ECB HEADACHE

One consequence of the Brexit jitters is the fresh slump in bond yields, with over $11 trillion in government bonds now yielding less than zero, and German 10-year yields falling into negative territory earlier in the month.

German yield falls below the European Central Bank’s deposit rate will exacerbate the acute scarcity of bonds eligible for the ECB’s asset purchase program. That could pressure it to cut interest rates further to accommodate these bonds.

But just a quarter of the June survey participants who answered a special question on the subject thought the ECB would run out of bonds to buy.

“Markets have indeed been pricing in the possibility that the ECB would come up against practical limits on its purchases of government bonds by 2017,” said Andrew Milligan at Standard Life Investments.

But the ECB has already broadened the range of instruments eligible for its 1.7 trillion euro stimulus plan, he noted, referring to its recent move into high-grade corporate debt.

Jan Bopp, asset allocation strategist at Bank J. Safra Sarasin disagreed, predicting that unless criteria were changed, the ECB would run out of bonds by December.

“This in itself is feeding the bond market rally as the ECB needs to move further along the yield curve to purchase bonds,” he added.

(Additional reporting by Karin Strohecker, Massimo Gaia and Hari Kishan; Editing by Hugh Lawson)

‘Why are you here?’ Juncker asks Brexit lawmakers

EC President Juncker welcomes Farage, the leader of the UKIP, prior to a plenary session at the European Parliament on the outcome of the "Brexit" in Brussels

BRUSSELS (Reuters) – European Commission President Jean-Claude Juncker asked lawmakers of Britain’s anti-EU UKIP on Tuesday why they had attended a European Parliament session to discuss the consequences of the British vote to leave the bloc.

“We must respect British democracy and the way it has expressed its view,” Juncker said in a speech to parliament, words that were greeted by rare applause from the UKIP members present.

“That’s the last time you are applauding here… and to some extent I’m really surprised you are here. You are fighting for the exit. The British people voted in favor of the exit. Why are you here?” Juncker continued, breaking from his speech text.

Juncker spoke from a desk next to that of UKIP leader Nigel Farage, who followed the largely French and German speech with headphones and with a British flag planted in front of him.

Before the session began, Farage had gone over to speak to Juncker. Both men appeared relaxed and as Farage made to leave, Juncker pulled him close and gave him an air-kiss on the cheek.

Juncker said he would make no apology for being “sad” at the result of the British vote – “I am not a robot,” he said, “I am not a gray bureaucrat.”

He urged Britain to explain quickly what it wanted from the EU in terms of a new relationship but insisted he had told his staff to engage in no preliminary talks with British officials until London engages the two-year mechanism for leaving the EU.

“No notification, no negotiation,” he said.

On a rare personal note, the 61-year-old former Luxembourg prime minister, struck out at critics, notably in the German press but also among east European governments, who have called on him to stand down following the Brexit vote.

“I am neither tired or sick, as the German papers say,” he said. “I will fight to my last breath for a united Europe.”

(Reporting By Philip Blenkinsop; Editing by Alastair Macdonald)

Stocks drop for second day after Brexit vote

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S.

NEW YORK (Reuters) –

Wall Street tumbled again on Monday after Britain’s shock vote to leave the European Union, sending major U.S. stock indexes to their worst two-day swoon in about 10 months.

The Dow Jones industrial average fell 260.3 points, or 1.5 percent, to 17,140.45, the S&P 500 lost 36.85 points, or 1.81 percent, to 2,000.56 and the Nasdaq Composite dropped 113.54 points, or 2.41 percent, to 4,594.44.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

 

Brexit fallout crushes financial stocks

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. June 27, 2016.

By Yashaswini Swamynathan

(Reuters) – U.S. bank stocks led a steep decline on Wall Street on Monday as aftershocks from Britain’s vote to leave the European Union roiled global markets for a second day.

The S&P financial index was down nearly 3 percent by late morning, with investors increasingly worrying about London’s future as the region’s finance capital.

JPMorgan fell 3.7 percent, while Bank of America dropped 5.4 percent. The stocks were among the biggest drags on the S&P 500.

The Dow has now lost nearly 950 points since the “Brexit” vote outcome, setting it up for the worst two-day decline since August 2015.

European stocks were hammered yet again and the sterling fell more than 2 percent. The European banks index on Monday hit its lowest since July 2012.

“What I can say with certainty is uncertainty will remain,” said Tina Byles Williams, chief executive officer of FIS Group.

The selloff on Friday eroded $2.08 trillion in market capitalization globally – the biggest one-day loss ever, according to Standard Poor’s Dow Jones Indices, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis.

U.S. Treasury Secretary Jack Lew, however, said the market impact from Brexit had been orderly so far and there were no signs of a financial crisis arising from the vote.

At 10:51 a.m. ET (1451 GMT) the Dow Jones Industrial Average was down 316.12 points, or 1.82 percent, at 17,084.63. The S&P 500 was down 42.83 points, or 2.1 percent, at 1,994.58. The Nasdaq Composite was down 118.77 points, or 2.52 percent, at 4,589.21.

Eight of the 10 major S&P sectors were lower. Utilities and telecom service were the only ones in the black.

The Brexit vote, which Federal Reserve Chair Janet Yellen had said would have significant repercussions on the U.S. economic outlook, is expected to scuttle the Fed’s ability to raise short-term interest rates.

Traders have virtually priced out an interest rate increase this year, according to CME Group’s FedWatch tool.

Declining issues outnumbered advancing ones on the NYSE by 2,573 to 363. On the Nasdaq, 2,372 issues fell and 342 advanced.

The S&P 500 index showed 5 new 52-week highs and 24 new lows, while the Nasdaq recorded 10 new highs and 118 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty)

UK vows action after racially motivated hate crimes

A Polish delicatessen is seen in Hammersmith, west London, Britain

By Michael Holden

LONDON (Reuters) – Polish and Muslim leaders in Britain expressed concern on Monday after a spate of racially motivated hate crimes following last week’s vote to leave the European Union in which immigration was widely regarded as a key factor in the outcome.

Police said offensive leaflets targeting Poles had been distributed in a town in central England, and graffiti had been daubed on a Polish cultural center in London on Sunday, three days after the vote.

Meanwhile, Islamic groups said there had been a sharp rise in incidents against Muslims since last Friday, many of which were directly linked to the decision for a British exit, or Brexit.

Prime Minister David Cameron condemned the attacks in parliament.

“In the past few days we have seen despicable graffiti daubed on a Polish community center, we’ve seen verbal abuse hurled against individuals because they are members of ethnic minorities,” he said.

“We will not stand for hate crime or these kinds of attacks. They must be stamped out,” he added.

The Polish embassy in London said in a statement it was shocked and deeply concerned by the xenophobic abuse and Poland’s foreign affairs minister Witold Waszczykowski said he had discussed the issue with David Lidington, Britain’s Europe Minister.

Immigration emerged as one of the key themes of the EU referendum campaign, with those who backed a British exit arguing membership of the bloc had allowed uncontrolled numbers of migrants to come to Britain from eastern Europe.

A few days before the vote, Sayeeda Warsi, a former minister in Cameron’s ruling Conservative Party, quit the Brexit campaign accusing it of spreading lies, hatred and xenophobia.

There has been a large Polish community in Britain since World War Two and that number has grown after Poland joined the EU in 2004. There are about 790,000 Poles living in Britain according to official figures from 2014, the second-largest overseas-born population in the country after those from India.

OFFENSIVE LEAFLETS

Cambridgeshire Police said they were investigating after offensive leaflets were left on cars and delivered to homes in Huntingdon. According to the local paper, the Cambridge News, the cards, which had a Polish translation, read: “Leave the EU/No more Polish vermin”.

At the Polish Social and Cultural Association in London, which opened in 1974 and is home to the majority of Britain’s Polish organizations, graffiti was painted on the side of the building calling on Poles to leave the United Kingdom.

“This is an outrageous act that disgusts not only me and the Polish community but everyone in Hammersmith & Fulham,” local lawmaker Andy Slaughter said on Twitter.

The Muslim Council of Britain, an umbrella group for many of the organizations which represent the country’s 2.7 million Muslims, said more than 100 hate crimes had been reported since the result of the referendum.

“Our country is experiencing a political crisis which, I fear, threatens the social peace,” said Shuja Shafi, the MCB Secretary General.

Fiyaz Murghal, the founder of a group which monitors attacks on Muslims, said it had received details of some 30 incidents including a Muslim councillor in Wales who was told to pack her bags and two men shouting “We voted for you being out” at a Muslim woman wearing a hijab as she went to a mosque in London.

“The Brexit vote seems to have given courage to some with deeply prejudicial and bigoted views that they can air them and target them at predominantly Muslim women and visibly different settled communities,” Murghal said.

(Additional reporting by Guy Faulconbridge and Marcin Goclowski in Warsaw; editing by Stephen Addison)