UK and Europe
Another swing in opinion polls back towards Remaining in the EU has sparked a six-month high for the British pound and a surge in UK and European stocks.
The FTSE 100 surged over 1.5% before giving back most of the gains in the afternoon, tracking a late drop in the British pound. Stock markets have been moving in lockstep with sterling ahead of the UK’s EU referendum. Lighter volumes are causing some erratic price moves with many traders sitting on their hands until after the referendum result. Some better US economic data, which strengthened the dollar, weighed on the pound, which was already well over-extended given that the referendum result is still not known.
Investors who wanted to protect their portfolio against adverse moves in sterling or other UK assets will have done so already. With polls now showing a bias towards a Remain vote, there is no need for any more hedging.
Tesco (LON:TSCO) shares jumped after the supermarket reported its second quarter of rising UK sales and the sale of the Harris and Hoole coffee chain. The rise in UK sales is especially encouraging for a quarter in which Tesco heavily slashed prices. The results show customers are coming back to shop at Tesco, evidence that CEO Dave Lewis’ restructuring plan is taking shape.
Whitbread (LON:WTB) shares saw a nice relief rally since Café Nero, not Costa will take over Tesco’s coffee chain Harris and Hoole.
Brexit-sensitive bank shares were amongst the top risers with heavily weighted mining shares also higher amid improved investor sentiment.
US
US stocks opened in the green, bolstered by improving sentiment in Europe on signs that the UK will vote to remain in the EU.
Shares of Blackberry (TO:BB) opened higher after reporting that it broke even for the quarter when expectations for an loss of 8c per share, though revenues fell well short of expectations.
Trilio, the software company that provides APIs to integrate video, text and VOIP messaging for developers surged above its IPO price of $15 per share to reach as high as $23 on its first day of trading.
FX
The US dollar fell against every G10 currency barring the Japanese yen as investors piled into the British pound as well as commodity currencies.
Sterling was heavily bid overnight following two polls suggesting a ‘Remain’ lead, then extended the gains after two more from ComRes and Populus confirmed a clear lead. GBP/USD struck six month highs just shy of 1.4950, before pulling back sharply to 1.48 after some positive economic data from the US strengthened the dollar.
A recovery in the price of oil from a drop yesterday supported the Norwegian and Canadian dollar.
The euro gained as traders viewed Britain remaining part of the EU as positive for the European economy despite data showing Eurozone business activity slipping to a 17-month low.
Commodities
The price of gold has been relatively stable since the fall in the value of the US dollar has to some degree offset flows out of safe-havens. A shooting at a German cinema complex was an additional concern.
The price of oil reversed yesterday’s losses buoyed by better market sentiment and an improved global economic outlook ahead of perceived likely Remain vote in the EU referendum. Oil had fallen on Wednesday after a smaller than expected draw in US inventories.
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