Europe
It’s been another sea of red for equity markets today and big losses for banking stocks in Europe as they got another pummelling across the board with Royal Bank of Scotland (LON:RBS) and Barclays (LON:BARC) continuing their Friday slide the shares getting halted again after being halted twice on Friday.
European banking stocks don’t appear to be faring any better as the prospect of continued uncertainty about a future relationship between the UK and the EU and the linkages between the respective banking sectors continue to fuel uncertainty about the stability of the sector.
While Chancellor George Osborne surfaced from his self-imposed silence in the wake of last week’s vote his comments, while measured were unable to prevent the feeling that UK politics remains in a state of paralysis, with no clear contingencies in place to deal with the fallout of a leave vote.
The FTSE 250 has borne the brunt of the sell-off in the UK market, dropping below its February lows, due to its heavier exposure to the UK economy, having fallen over 2,000 points in the last two days.
In order to give some perspective though over a five year time frame the picture does look somewhat different, with the FTSE100 only up 6% in that period, while the FTSE250 is still up over 30%, well above levels seen in back in 2011 when it was trading around the 10,500 level.
Deutsche Bank (DE:DBKGn) has once again hit new record lows while Italian banks have also remained under pressure, with Unicredit (MI:CRDI), Monti Dei Paschi and Popolare (LON:0QRG) all down heavily at new all-time lows, as concerns about the huge amount of non-performing loans prompt new concerns about their solvency.
Reports that the Italian government is weighing up measures that could add up to €40bn into Italian lenders haven’t been enough to support the share prices, probably down to the fact that these banks have non-performing loans in excess of €300bn.
Spanish banks have also slid back despite initially opening higher after the weekend election saw Mariano Rajoy once again fall short of an overall majority, though his party did increase the number of seats from the vote in December.
EasyJet (LON:EZJ) shares went into a nosedive sliding sharply and hitting a three year low after the company warned this morning on profits in the wake of last week’s Brexit vote, as well as recent disruptions caused by the French air traffic control strikes. This in turn has dragged on the rest of the travel and leisure sector with Thomas Cook (LON:TCG) and BA owner International Consolidated Airlines (LON:ICAG) following suit.
Other companies also heavily exposed to the UK economy have been hit hard with Marks and Spencer (LON:MKS) and Next (LON:NXT) sliding towards three year lows.
Housing stocks have also slid adding to their Friday losses led by Taylor Wimpey (LON:TW) and Barratt Developments (LON:BDEV) while London estate agent Foxtons (LON:FOXT) warned that the London property market could well see a prolonged downturn as a result of last week’s vote, as their share price hit their lowest levels since the IPO in 2013, down over 60% from when it.
On the plus side gold miners have continued to benefit as a result of continued resilience in the gold price with Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) leading the gainers.
Defensive stocks have also started to see some bids come in with the big global multinationals finding a few buyers, as Diageo (LON:DGE), Unilever (LON:ULVR) and Reckitt Benckiser (LON:RB) all benefit from a weaker pound.
US
US markets opened sharply lower as the selloff in banking stocks rippled out across the Atlantic, while fears about a stronger US dollar and its impact on overseas earnings weighed on the upside.
The US economy continues to show signs of slowing down with the latest June Markit Services PMI coming in at 51.3, unchanged from May.
FX
The pound has continued to come under pressure while the 10 year gilt yield has fallen below 1% for the first time ever in a sign that the market is pricing in the prospect of significant further easing measures from the Bank of England in the coming weeks and months.
Weaker oil prices have also dragged on the commodity space, while the US dollar has benefited from some safe haven flows, making it outperform across the board, except against the Japanese yen which has once again seen an appreciation in value. Any further gains could well see the Bank of Japan start to show an interest particularly if it drops below 100.00.
Commodities
Oil prices have continued their recent weakness driven down by a firmer US dollar as well as concerns that slower demand will mean that surplus stockpiles get worked off at a slower rate.
Gold prices have remained underpinned as risk aversion keeps a floor under the yellow metal which has managed to consolidate its position above the 200 week MA.
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