The decision of British citizens to leave the EU (Brexit) caused a stampede of investors from risky, especially British assets. The course of the pound against the dollar fell to a minimum of thirty years, the stock markets of most countries of the world closed the fall of indices. Investors are watching the actions of the central banks to stabilize the situation. At the same time as protecting the assets selected US debt and gold.
Unexpected results of the referendum in the United Kingdom called the strongest of all time treatment depreciation of the pound sterling. By 7:30 Moscow time the British currency depreciated by 11%, to $ 1.3224, the lowest since updating in September 1985. In the hours that followed the pound played some lost ground, however, and so remained at the levels of three decades ago. As of 20:30 the pound was fixed near the mark of $ 1,376, which is 8.1% below the close on Thursday. The dramatic story takes place in the stock market. At the opening of trading on the LSE FTSE-100 index has fallen by 8.6%, reaching a four-month low – 8575 points. Following the auction, the index has played a large part of the decline and closed at 6138.69 points, which is only 3.15% below the close on Thursday. However, this was due to the weakening of the pound sterling.
Despite the fact that all recent polls say the predominance of opponents Brexit, won by his supporters. It was a complete surprise for the markets, the scale comparable to the collapse of Lehman Brothers in September 2008, Raiffeisenbank analysts say. Exit from the EU’s second economy of scale creates a negative precedent, and the loss of synergies will cost the UK about 3% of GDP by 2020, so the probability of such a scenario few believed until the end, said the head of analytical department of the bank “Zenith” Vladimir Evstifeev.
Unexpected British subjects will ricochet effect on the whole European region and risky assets in general. During yesterday’s trading, European stocks tumbled 7-14%, and returned to the levels of five-month-old. 1,3-7,4% decline in finished Friday trading the leading Asian indices. US indexes to 20:30 MSK fell by 3%. The general trend is down and the Russian stock indices: MICEX index dropped by 1.8%, to the level of 1884.41 points, the RTS index fell by more than 3%, to the level of 912.5%.
However, investors’ concern is not so much Brexit consequences for the UK economy as a precedent for the EU.
“Great Britain -. The least integrated country in the EU It has its own currency, its central bank, its monetary policy, it is not part of the Schengen agreement, and therefore its output for the EU the least painful . However, the increased risks further disintegration of the region, which could have a negative long-term effect, “- said the director of analytical department of” TKB Investment Partners “Gennady Sukhanov. Analysts believe Sberbank Investment Research, is now the credibility of the EU and so weak, and the strengthening of populist trends in the run-up to the elections in Germany and France in the next year is a serious threat in this respect. “Disintegration processes in the global economy is traditionally perceived negatively by investors and lead to a decrease in risk appetite,” – notes Mr. and Evstifeev.
In the current environment as protective tools investors use debt obligations of developed countries, primarily the United States and a number of major European countries, as well as gold. Yesterday the yield ten-year US Treasuries for the first time in July 2012 fell below 1.4% per annum, the French bond – to 0.3% per annum, while the German bond rate for the first time in history reached minus 0.1% per annum. Quotes of gold for the first time since March 2013 shot up above $ 1,350 per troy ounce, adding to the beginning of the day more than 8%. “The dollar – the reserve currency, and the US economy is less likely to suffer from the problems of the EU and UK Gold has historically protected from inflation / deflation and downside risk of the global economy.” – Explains a senior portfolio manager of the Criminal Code “Capital” Vadim Bit -Avragim.
Nearest market reaction will be wavy, says chief strategist and head of the analytical department of the Julius Baer Christian Gattiker. The outbreak of the first wave is expressed in an active hedging of risks, especially foreign exchange. The second wave will be linked with an attempt to find answers to the questions will be whether the UK out of the EU and its end will be whether expressed in changing yield spreads of bonds of peripheral European countries. As in previous periods of turbulence in the global market, investors are waiting for the Central Bank of the leading ready to provide liquidity markets and to take steps to alleviate the pressure on the peak of sales. “From the managers of large Bank of investors will wait for forecasts for the near future, as well as comments about their vision of the current situation of the market reaction to these statements will be a key factor in determining how deep and long is the current wave of sales in international markets.”, – Analysts Gazprombank. According to Mr. Gattikera, the third wave will reflect the reaction of investors beyond the initial comments of European politicians and central bankers, and mitigation interventions may last several months. The situation around the UK to reduce the likelihood that the Fed will be able to move to a sustainable increase in the interest rate. “Prolonged and controlled transition process to transform the relations of Great Britain and the EU implies that the situation on the world markets is unlikely to develop in the scenario of the financial crisis of 2008,” – said the chief economist at Alfa Bank, Natalia Orlova.
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