Article / 28 June 2016 at 7:00 GMT

Morning Markets: England team shows UK how to exit in style

Managing editor, / Saxo Bank



  • UK: CBI Distributive Trades Survey (1000 GMT) 
  • US: Q1 GDP Revision                      (1230 GMT)
  • US: Consumer Confidence Index     (1400 GMT)

Sterling's precipitous plunge since last Friday's earth-shattering Brexit vote saw a fresh 31-year low of $1.3121 before steadying through the Asian session to around the $1.33 mark, but there is a sense that the trapdoor is opening for yet further declines.

Credit rating agencies Standard & Poor's and Fitch both downgraded the UK overnight and in something of a historic day for UK government debt, borrowing costs on 10-year gilts fell below 1% for the first time since records began in 1703.

With a crisis of leadership in both the Conservative Party and the Labour Party also exacerbating the uncertainty, markets have given the biggest of thumbs down to the UK with the FTSE 100 down another 2.6% Monday and the FTSE 250 — a more accurate barometer of the health of UK companies — sliding 7.47% for a cumulative near 15% fall combined with last Friday.

So much for the efforts of thoroughly discredited UK chancellor George Osborne to try and reassure markets Monday.

Trading of shares in both Barclays and the Royal Bank of Scotland was suspended briefly after 8% falls and It is with dire warnings of recession and worse ahead, that David Cameron goes to Brussels for what is likely to be a chastening summit with European Union heads where he will most likely be consigned to the naughty chair.

The mood in the European Council might have been lightened somewhat overnight, however, by the English football team's valiant efforts to show the UK leader just how to execute an exit with class, dexterity and the minimum of fuss. A chortle or two in the background from the likes of Jean Claude Juncker will no doubt alleviate the gloom who must be delighting in the schadenfreude.

Elsewhere, a fresh liquidity injection from Beijing has kept USDCNH around the 6.69 area but the possibility of breaching 7.0 some time soon must be on the cards, gold continues to cement its base above $1,300/oz and USDJPY remains in sight of 100.0.

South Korea meanwhile announced a near $17 billion package to address the negative impact of the Brexit vote and Japan may follow with something significantly bigger. It's just the beginning of the Brexit era. There's much, much more to come.

Market signals

Asian session

  • Falls on Wall St and on European bourses overnight weighed on sentiment in Asia
  • Both Fitch and S&P downgraded UK sovereign debt over slowing growth fears
  • Safe-haven asset gold has made gains; it was worth $1,318.30/oz at 0459 GMT
  • Japanese PM Shinzo Abe has called on G7 nations to cooperate and stabilise markets
  • Japan's Nikkei 225 fell heavily in early trade and then rebounded into positive territory
  • The Nikkei 225 was up 0.33% to 15,359.65 at 0541 GMT
  • The Shanghai Composite was down by a slim 0.11% to 2,892.43 at 0600 GMT
  • Hong Kong's Hang Seng was down by a hefty 0.8% to 20,066.14 at 0602 GMT
  • India's S&P BSE Sensex was up 0.26% to 26,470.47 at 0603 GMT
  • Australia's benchmark S&P/ASX200 was battered by Brexit fallout
  • The S&P/ASX200 closed down 0.51% at 5,111.10

Forex ahead

  • The troubled pound was worth just 1.3294 at 0559 GMT
  • The US dollar failed to gain much ground against the yen
  • The US dollar was worth ¥101.9375 at 0557 GMT
  • The euro regained a little ground against the yen; it was worth ¥112.7614 at 0558 GMT
  • The Aussie dollar lost ground against the US dollar; it was worth just 0.7400 at 0557 GMT

From the Floor

A bad dream. "Until Article 50 is invoked, the market is on a nervous footing almost in the hope that it doesn't happen", says Hardy.

Maersk's share slide. "China's Silk Road has cut down the travel time to Europe and this will have a big impact on the shipping container market", says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Some of today's data may no longer be relevant, thanks to fallout from the UK vote, but it still deserves scrutiny, says James Picerno

Europe stands united
The Brexit result gave far right groups a  lift, but EU leaders will unite to curb any UK vote contagion, says former EU ambassador Sir Stephen Wall in this commentary from CNBC.

Trade at stake
Half of its exports go to Europe, so the UK must act smartly to avoid damage from losing free access to Europe, says former US Commerce Secretary Carlos Gutierrez in this CNBC piece

Heavy weather ahead
The UK is ready to face the challenges thrown up by the leave vote, Chancellor George Osborne says in this CNBC piece, but it won't be "plain sailing" in coming days and months.

Johnson's chalice
Boris Johnson has lead the 'Leave' campaign to a victory that he perhaps may not have wanted, and if he assumes the prime minister role in October, his leadership skills will face a severe examination, writes Martin O'Rourke.

Brexit in reality
Despite the soothing noises on Brexit and immigration, there is a reality on the street that is all too different and has Russian native and London resident Nadia Kazakova worried.


The Brexit victory will have given hope to right-wing groups across the
continent including Marine le Pen's National Front Party in France. Photo: iStock

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28 June
Neil D Neil D
Nice analogy Martin..............maybe we can exit politically without a similar level of embarrassment!
28 June
Martin O'Rourke Martin O'Rourke
Neil D, it could hardly be worse!
28 June
Neil D Neil D
Yes, we have an inherent knack as a footballing nation of building them up to only then see them fall/fail spectacularly.
28 June
Fxjo Fxjo
Nice piece Martin
28 June
Martin O'Rourke Martin O'Rourke
Nigel Farage tells the European Parliament that Britain will not be the last EU member state to vote for an exit.
28 June
Martin O'Rourke Martin O'Rourke
Tells the EP that the failure to strike a new trade deal with the UK would have far worse consequences for the EU than "it will for us".
28 June
Martin O'Rourke Martin O'Rourke
Marine Le Pen, leader of the National Front Party in France, says the Brexit vote is a "signal victory for democracy" and the most important moment in European history since the collapse of the Berlin Wall.


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