Brexit: series of records across markets

Posted on July 8, 2016

A nation divided: protesters against the Brexit vote wave an EU flag in front of Big Ben©Daniel Leal-Olivas/PA Wire

A nation divided: protesters against the Brexit vote wave an EU flag in front of Big Ben

Markets have broken a number of records in the two weeks since the UK voted to leave the EU.

Brexit uncertainty has accelerated investors’ flight to safety and increased the expectations that central banks will keep interest rates lower for longer.

Sovereign bond yields reached record lows. The 10-year US Treasury yield fell to 1.3210 per cent and new records were set on benchmarks for Germany, UK, France, Japan and Australia. The UK’s 10-year gilt auction was issued at the lowest rate on record — 0.91 per cent.

The classic haven of gold climbed to a two-year high of $1,375 an ounce. The pound fell below $1.30, a 31-year low while haven demand keeps the yen near the ¥100 to one US dollar threshold.

Brexit has also increased the likelihood of further monetary easing by the Bank of England and possibly the European Central Bank, pressuring bank shares on concerns that lower interest rates will squeeze profitability.

The Eurozone Stoxx bank index has fallen towards its 2012 low, led by Italian lenders, that have lost between a quarter to nearly half of their value since Brexit.

German giant Deutsche Bank recorded a nadir of €11.215, breaking its previous low set in January 2009. UK banks have also suffered hefty losses.

The UK’s domestically focused FTSE 250 is down over 7 per cent since the Brexit vote, with gains in gold miners offset by losses in banks, consumer and property companies.

Seven of the largest commercial UK property funds suspended trading this week, locking in about £15bn of assets.

Europe’s best performing major index since Brexit is the FTSE 100 which is up over 3 per cent in sterling terms. While a weaker pound boosts the internationally-focused index, it has dropped 9.5 per cent in dollar terms since Brexit. Miners and energy have fuelled the recovery, while banks and housebuilders have suffered.

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