Article / 14 June 2016 at 1:49 GMT

Brexit: FTSE stocks shed billions as opinion poll favours leave camp

APAC Sales Trading Desk / Saxo Capital Markets
  • The ICM/Guardian poll on June 13 showed the leave camp on 50%
  • The same poll showed the stay camp trailling well behind on just 45% of the vote
  • The FTSE dropped 1.2% on risk-off sentiment following the release of the poll
  • There’s no EU road map for the prospect of a British exit from their 28-nation union

By Saxo APAC Sales Trading

It was a very volatile day on Monday in GBP with some confusion over the last poll from ICM/Guardian, which was first sent to Twitter saying that the stay camp was ahead.

That triggered a rally in GBP of more than 100 pips before the real poll showed that the leave camp was actually ahead, pushing the GBP lower. We broke the 100 day moving average on Friday which is now a very strong resistance at 1.4354. The next target is at 1.4000.

 Brexit worries are having a clear impact on currencies and equities, as investors and traders await the June 23 vote and react to opinion polls in the meantime. Photo: iStock

GBP volatilities have literally exploded the past two days with the one-month ATM now trading at 28.3. The three month vol reaching new highs at 18, up from 16 the previous day. Liquidity is getting worse. June 23/24 June is now pricing 125% in volatilities.

The 10-year bond yield has traded at a record low of 1.209%. The market is now showing at 37% chance of rate cut by the end of 2016 compared to just 31% on Friday. Corporate bond yields are also falling due to Treasury yields lower but the credit spread is widening.

FTSE takes a tumble

The FTSE dropped 1.2% on pure risk-off sentiment following the release of the ICM/Guardian poll favouring the leave camp and the index lost the equivalent of £67bn in just three days. Banking stocks were among the biggest laggards as concerns about remaining in a low interest rate environment also weighed on the sector.

Investors were also fearful about the sector’s exposure to the UK economy in the event of a Brexit. Shares in Lloyds Banking Group tumbled 4.2% to £0.642 and Barclays lost 2.5% to £1.652.

There’s no road map for European authorities facing the prospect of a British exit from their 28-nation union – by design. Officials in Brussels are under orders not to commit any scenarios to paper to avoid alarmist leaks, according to a senior official from one European government tasked with making preparations.

– Edited by Robert Ryan

Saxo Research on Brexit. Check out our website for trade strategies, comments and research here.


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