Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investors Map Post-Brexit Strategies Amid Global Market Upheaval

Stock-Markets / Financial Markets 2016 Jun 26, 2016 - 09:27 PM GMT

By: Bloomberg

Stock-Markets

Pulling data and information from around the globe, this is a nice round up story from Bloomberg about how Credit Suisse Group AG, Morgan Stanley, Charles Schwab & Co, Deutsche Bank AG and others are starting to map post-Brexit strategies around stocks, currencies, bonds, emerging markets, corporate debt.

  • Flummoxed investors seek havens, bargains in uncharted waters
  • History suggests more losses, months before a full recovery

By Phil Kuntz

(Bloomberg) -- 

Britain’s vote to leave the European Union almost a quarter century after its creation with the Maastricht Treaty left global markets in disarray Friday. Today, investors start to figure out the way forward.

“Ultimately, we have no experience in what will happen next,” Glen Capelo, managing director at Mischler Financial Group Inc., who has spent the intervening years on various trading desks, said in a note to clients. “Twenty-three years of positions may now need to be unwound,” he added in an e-mail.

While investors were caught off guard by the vote, several themes emerged from the frantic trading and onslaught of research reports. This market map for the coming months may or may not lead to treasure but almost certainly involves Treasuries:

Stocks

European equities are likely to bear the downdraft’s brunt. Credit Suisse Group AG cut year-end targets for U.K., European and U.S. stock benchmarks by 6.5 percent, 14 percent and 7.5 percent, respectively. Morgan Stanley sees Britain’s FTSE 100 Index falling as much as 19 percent and the Euro Stoxx 50 Index dropping up to 14 percent, with financial and consumer discretionary stocks hit hardest and staples and health-care shares outperforming.

Jeff Kleintop, chief global investment strategist at Charles Schwab & Co., predicted rippling consequences: U.S. dollar gains from haven-seekers will push down commodities, cutting companies’ earnings and prompting devaluation of the yuan as fewer exports to Europe, China’s biggest customer, possibly “renew economic hard landing concerns for China.”

On a more hopeful note, Kleintop compared the current selloff to those following Japan’s March 2011 earthquake, the U.S. debt-ceiling standoff that August and the 2012 euro zone recession triggered by the debt crisis. All three markets declined at least 11 percent. “It is important for long-term investors to note that in each of these instances stocks rebounded to their pre-shock level in three or four months,” Kleintop said in a note.

Stock-trading ideas run the gamut.

Yogi Dewan, chief executive officer at Hassium Asset Management, says he’s selling European stocks to buy U.K. equities, because he expects the Bank of England to cut rates and reignite its quantitative easing program to support growth. Capelo said such moves may make matters worse for banks already “crippled by the negative rates.”

RBC Capital Markets suggested investing in Nordic banks including Danske Bank A/S, Swedbank AB and DNB ASA because “they have relatively low beta and their earnings should be more resilient.” Strategists at Wells Fargo Investment Institute predicted the U.S. dollar will emerge unscathed, helping U.S. companies that sell overseas, and stood by a 2016 target for the Standard & Poor’s 500 Index that implies a 7.5 percent gain from Friday’s close.

And there are always the companies that produce the premier safe-haven asset. The MSCI ACWI Select Gold Miners Index rose about 6 percent on Friday, reaching its highest level since March 2014.

Currencies

The largest risks in the foreign-exchange markets involve commodity-rich countries and economies reliant on the U.K. The biggest beneficiaries are likely to be the traditional safe havens, the dollar and the yen.

Lee Ferridge, the Boston-based head of macro strategy for North America at State Street Global Markets, said the yen may strengthen to 95 per dollar by year-end, from about 102 Friday. The pound will probably recoup some losses and trade at about $1.40 against the U.S. dollar, he said.

Deutsche Bank AG is keeping its bearish year-end euro forecast at $1.05,George Saravelos, co-head of global foreign-exchange research in London, said in a note. The euro slumped 2.4 percent to $1.1109 on Friday.

South Africa’s rand is among the most vulnerable emerging-market currencies because of close financial ties to the U.K., while ruble investors may find some benefit from the isolation provided by sanctions on Russia, UniCredit SpAanalysts said before the vote. Morgan Stanley advised selling Australian dollar against the yen.

Investors who bet against Eastern European currencies going into the vote expect further declines. Peter Schottmueller, head of emerging-market and international fixed income at Deka Investment GmbH in Frankfurt, shorted the Polish zloty and Brazil’s real before the referendum. He closed his real position when it started trading Friday and is keeping his bearish bet on Poland, which counts the U.K. as its third biggest export destination.

Bonds

Credit Suisse said in a note that it sees 10-year Treasury yields “threatening historical lows, while Germany and Japan will move further into uncharted negative territory.”

Benchmark 10-year Treasury yields fell about 19 basis points on Friday to 1.56 percent, after approaching the record low of 1.38 percent, set in 2012.

“Fixed-income portfolios should limit profit taking this month,” wrote Jim Vogel, head of interest-rate strategy at FTN Financial in Memphis, Tennessee. “Probability is high a counter-party will need, and be willing to pay more for, current portfolio items sometime in the next several weeks.” Turn to municipal bonds to escape volatility because fundamentals move more slowly for state and local governments, he said.

“We expect Treasuries to outshine Bunds over the next month,” said Michael Schumacher and Boris Rjavinski, senior analysts with Wells Fargo Securities, in a note. “Bunds have nearly kept pace with Treasuries since the U.K. polls closed, but fears over EU fragmentation should give Treasuries the relatively stronger bid.”

For now, yields on Treasuries and gilts are both falling as they did after the U.S. was downgraded in 2011, with gilts leading the way. “Should gilts lead Treasuries? We think not. We still expect capital to flow out of the U.K., with the U.S. being a very likely destination,” they said.

Emerging Markets

The impact on developing countries will be modest, said Geoffrey Dennis, head of global emerging-market strategy at UBS Securities. He may rethink his slight over-weighting of stocks in Europe, the Middle East and Africa because countries like Turkey, Greece and South Africa send significant slices of their exports to the U.K.

“People in the U.K. are going to have less money to spend overseas,” he said by phone from Boston. Asian countries, which have been underperforming emerging-market peers so far this year, may see more inflows as investors flee Europe’s turmoil, he added.

Viktor Szabo, who helps oversee about $10 billion in emerging market debt at Aberdeen Asset Management Plc in London, sees emerging markets soon reverting to “business as usual.” High-yield debt from developing countries could even benefit from a lower-for-longer interest-rate environment in Europe. “We might see more inflows into emerging debt,” he said.

Schottmueller at Deka said he searched for assets that are the least correlated with Brexit. “We added to our position in Gazprom, because there is little link between Russia’s state-controlled company and the Brexit, we bought some debt in Argentina and Indonesia and we closed our short call on the real,” he said.

Corporate Debt

“Our view is that the expected panic in credit markets will only last a day or two, and will provide an opportunity to buy at better levels,” Credit Suisse said in a note.

Morgan Stanley advised being “brave” by buying European corporate debt due to potential and existing support from the European Central bank. “We expect a strong response from the ECB,” a note from the firm said.

Dan Ivascyn, group chief investment officer of Pacific Investment Management Co., said he’s eyeing housing-related assets that may remain shielded from political turmoil in Europe, including “senior, well-protected risk in the mortgage market.”

http://www.bloomberg.com/news/articles/2016-06-26/investors-map-post-brexit-strategies-amid-global-market-upheaval

bloomberg.com

Copyright © 2016 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in