Article / 02 June 2016 at 2:44 GMT

Brexit fears grip investors - FTSE, GBP pummelled

APAC Sales Trading Desk / Saxo Capital Markets
  • More than £20bn wiped off FTSE 100 in two days as Brexit fears grip investors
  • The 10 year Gilt yield fell 6 basis points to 1.37%, the lowest level in two weeks
  • UK manufacturing remains subdued and is 'a likely drag on the wider economy'

By Saxo APAC Sales Trading

The latest poll showing an increase in support for Britain to leave the European Union pushed GBP much lower overnight to almost reach the support set by the 100 Day Moving Average.

EURGBP had a similar move and rallied strongly all the way up to the 100 Day Moving Average which will be the strong resistance.

  • Short-term volatilities exploded higher yesterday after a second day of GBP falling. 1M vol ATM traded 4 vols higher to a high of 21, the highest level since 2009. The 1 day vol 23/24 June rallied also from 70% few days ago to 95%. For information, the market is extremely illiquid in the volatilities market and gaps a lot.
  • UK Rates: The 10 year Gilt yield fell 6 basis points to 1.37%, the lowest level in two weeks. The UK’s 30-year break-even rate, a bond market gauge of expectations for retail prices over the next three decades, has fallen below 3 percentage points for the first time since February 2015. Risks of the UK leaving the European Union alongside subdued domestic economic data have weighed on the prospects of a pick-up in inflationary pressures.
Risks of the UK leaving the EU, alongside subdued domestic economic data,
have weighed on prospects for inflation picking up. Photo: iStock


  • Equities: More than £20bn was wiped off FTSE 100 in two days as Brexit fears gripped investors. Mining stocks were among the biggest casualties on the blue chip index, as iron ore futures in China tanked to a three-month low amid weaker demand and copper skidded to a one-week low. Rio Tinto was down 3.8% to £18.68, Antofagasta was 3.1% lower to 415.7p, BHP Billiton lost 1.9% to 807.1p and Glencore was 1.7% in the red at 128.9p.
  • On the positive side, Unilever edged up 1% to £31.78 after it revealed it would sell its  soy-based beverage unit for $575m. Pharma stock Shire was also among the top performers following a bullish note from Credit Suisse. One of the biggest loser was RBS down 3%.


Markit Economics’ Purchasing Managers Index showed Wednesday that while UK manufacturing returned to growth in May, the pace remained subdued and was a likely drag on the wider economy.

The OECD cut the UK growth forecast to 1.7% from 2.1% and strengthened Prime Minister David Cameron’s case for staying in the EU as it cut its UK growth forecast Wednesday and repeated its warnings about the economic damage a vote to leave would cause.

-- Edited by Adam Courtenay

For more Saxo research on Brexit: See our website for trade strategies, comments and research


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