Five Things You Need to Know to Start Your Day
Markets surge as Brexit risk wanes, Brent is back over $50, and Rajan isn’t staying on at India’s central bank. Here are some of the things people in markets are talking about today.
The week is starting with a huge rally in equity markets globally. In Asia the MSCI Asia Pacific Index climbed 1.8 percent after a poll showed a swing towards ‘remain’ in the U.K. referendum on European Union membership. Japan’s Topix index closed 2.3 percent higher as the yen weakened. In Europe, the Stoxx 600 index was 2.9 percent higher at 5:31 a.m. ET with all industry groups gaining. S&P 500 futures were up 1.3 percent.
Big moves in bonds, fx
The headline winner in currency markets is the British pound which was trading at $1.4626 at 5:55 a.m. ET, climbing the most since 2008, as Brexit fears wane. The biggest move on the day has to go to the Nigerian naira, which dropped 22 percent in the first day of free-float trading following a decision by the country’s central bank. In the bond market, European sovereign debt is reversing the trend of last week as Spanish, Italian and Irish bonds rally while German sovereigns weaken. Morgan Stanley said that investors should back longer-term bonds ahead of the referendum as rates would fall much more on a ‘leave’ vote than they would rise on a ‘remain.’
Brent back over $50
Crude, which just had a week to forget, is gaining this morning, with West Texas Intermediate for July delivery at $48.67 a barrel at 5:55 a.m. ET and Brent for August settlement rising above $50 this morning, having traded at $47 as recently as last Thursday. In other commodity news, gold is sinking the most in a month as markets switch to risk-on mode.
Rajan not staying at India’s central bank
In an unexpected move, India’s central bank Governor Raghuram Rajan has said that he will step down when his term ends in early September. He made it clear that he was willing to continue in the position, but he seems to have decided to leave due to a lack of government support. There are five candidates in line to replace Rajan at the central bank, according to a government official who asked not to be identified. Indian stocks, which fell at the open, closed 0.7 percent higher as the global rally and efforts by the Modi administration to calm investor nerves outweighed risks from the surprise announcement.
European politics, Trump strategy
There was a blow to Italy’s Minister Matteo Renzi over the weekend as candidates from the anti-establishment Five Star Movement won mayoral elections in Rome and Turin. In Spain — which is facing a second general election in six months on Sunday next — polling shows no clear leader, pointing to a repeat of the attempts to form a government that failed after December’s vote. In the U.S., Republican Donald Trump is gathering his top advisors to reassess strategy after a rough few weeks in polls which saw him trailing Hillary Clinton by 12 percentage points.