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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | London open: FTSE falls less than feared as Osborne cancels emergency budget London shares were down on Monday but not as badly as feared as the repercussions from Britain's referendum decision to split from the European Union continued to be debated, with George Osborne coming out of hiding to try and calm markets.
Just before 0900 BST the FTSE 100 was down 40 points or 0.65% at 6,098.65, while the more UK-focused 250 index was more than 300 points or 1.93% lower at 15,780.93.
The pound fell sharply in during the Asian session, but flattened off as the Chancellor gave a speech where he attempted to calm the markets, but was still down 1.9% versus the dollar at $1.3424 and down 1.4% on the euro at €1.2148.
Saying the Brexit result was "not the outcome that I wanted", Osborne said the Treasury and Bank of England were "ready to deal with the consequences" and retracted his recent warnings of an emergency budget.
The Chancellor said he favoured delaying triggering Article 50 - to start the process of leaving the EU - until it's clear what the terms would be in October when a new Prime Minister will have been chosen.
Market analyst Connor Campbell of SpreadEx commented: "It seems that George Osborne's appearance this morning, his first since before the referendum results were announced, has somewhat calmed investors' fears, the Chancellor joining many of his Tory colleagues in claiming there is no rush to trigger the dreaded Article 50 despite increasing pressure from Europe."
Ipek Ozkardeskaya at London Capital Group noted that there had been dozens of broker downgrades in homebuilders, financials, travel and leisure stocks at the start of the week, which are expected to reinforce the selling pressures at the heart of the FTSE stocks.
"The FTSE 250 should continue underperforming the FTSE 100 as small, medium sized companies have a narrower manoeuvre margin in terms of replacing their European business partners by alternatives deals overseas," she said. "Therefore, the Brexit should weigh heavier on small companies' shoulders, as big business have certainly in place a solid plan B, in order to go beyond the borders to strengthen their non-EU relationships."
In company news, EasyJet was leading the fallers, down more than 10% after it warned that profits were lower than expected in the third quarter and that the UK decision to leave the EU is likely to mean revenues in the second half of the year will be lower than last year, while costs will be £25m higher due to oil and currency movements.
Following the Brexit vote, the budget airline predicted "additional economic and consumer uncertainty is likely this summer and as a consequence it is expected that revenue per seat at constant currency in the second half will now be down by at least a mid-single digit percentage" compared to the second half of 2015.
Estate agent Foxtons was down almost 20% after it warned full-year revenue and adjusted earnings will be "significantly lower" than the previous year due to uncertainty caused by the referendum.
In a trading statement ahead of the company's interim results on 29 July, it said the run-up to the EU referendum led to significant uncertainty across London residential markets and the decision to leave Europe is expected to prolong that uncertainty.
Aviva was down despite trumpeting that its capital position was resilient to market stress, adding that Brexit will have no significant operational impact on the company. |
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| | UK Event Calendar | | Monday 27 June
INTERIMS
One Media IP Group, Porvair
QUARTERLY PAYMENT DATE
Royal Dutch Shell 'A', Royal Dutch Shell 'B'
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (US) (13:30)
Import Price Index (GER) (07:00)
M3 Money Supply (EU) (09:00)
GMS
Lebanese Co for the Development & Reconstruction of Beirut Central District SAL GDS (Reg S), Swallowfield
FINALS
Amedeo Air Four Plus Limited, Omega Diagnostics Group
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Amedeo Air Four Plus Limited, Hansa Trust
EGMS
Amedeo Air Four Plus Limited
AGMS
Anglo Asian Mining, Anglo-Eastern Plantations, Baron Oil , Coms, Curtis Banks Group, Eland Oil & Gas, Ergomed , PJSC RusHydro ADR , Surgical Innovations Group, Surgical Innovations Group, Velox3
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| | Europe Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe open: Stocks in the red as Brexit woes weigh European stocks were in the red in early trade as investors tried to gauge the impact of the UK's decision to leave the European Union, although losses were significantly less pronounced than were on Friday.
At 0855 BST, the benchmark Stoxx Europe 600 index was down 0.9%, Germany's DAX was 0.2% lower and France's CAC 40 was off 0.3%.
In Spain, the IBEX 35 was up 3.1% after acting Prime Minister Mariano Rajoy won the most votes in the country's repeat national elections on Sunday, although the People's Party fell short of a majority.
Meanwhile, the pound continued to lose ground against the dollar, trading at $1.3400 compared with $1.3676 late on Friday in New York. Ana Thaker, market economist at PhillipCapitalUK, said sterling remains subject to any guidance from the government as to what the next stages may be, with strong downside risk.
"The sheer extent of the uncertainty as to what Brexit really means for the UK economy and future company profits, combined with seismic changes in the political landscape is making it very difficult for investors to establish accurate fair-value levels for stocks, bonds and currencies," said Rebecca O'Keeffe, head of investment at Interactive Investor.
"The Spanish elections have provided some good news for European leaders as the fallout from the UK's referendum decision saw the Spanish election's equivalent flight to safety in increasing the number of seats for the conservative People's Party. However, the failure to reach an overall majority means an extension of the deadlock and challenges ahead to secure a working government."
George Osborne said on Monday that the UK was ready to face the future "from a position of strength", adding that there would be no immediate emergency Budget.
Looking to calm financial markets in his first public address since the referendum results, the Chancellor said in a statement: "Growth has been robust and employment is at a record high. Our economy is now about as strong as it could be to confront the challenge the country now faces."
After the result of the EU referendum, the Bank of England said it stood ready to provide £250bn of additional funds to support the UK's banks.
In corporate news, budget airline EasyJet tanked after warning that Britain's vote to the leave the European Union will dent sales in the second half of the year and reduce third-quarter pre-tax profit by around £28m.
Swedish truck maker Volvo was also sharply lower after it said it increased its provision for a possible European Commission fine by more than 60%.
The Stoxx 600 banks index was down 1.7%, well off the lows hit on Friday, while London-listed banks were firmly under the cosh but also not as weak as they were at the end of last week.
RBS was 10% lower, Barclays was down 8% and Lloyds Banking Group slid 6.3%.
Oil prices steadied, with West Texas Intermediate up 0.4% at $47.82 a barrel and Brent crude 0.7% firmer at $48.74. |
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| | US Market Report | | US close: Wall Street hit by risk aversion after Brexit Stocks on Wall Street registered sharp losses, as investors reacted to news that UK voters had opted to leave the European Union, albeit slightly smaller ones than those seen in August 2015 when fears of a Chinese devaluation hit markets.
The Dow Jones Industrial Average fell 3.39% or 610.32 to 17,400.75, the S&P 500 declined 3.59% or 75.91 points to 2,037.41 and the Nasdaq Composite was 4.12% weaker.
Volatility surged, with the CBOE´s VIX index leaping 49.33% to 25.76.
Worth noting perhaps, since 1986, whenever the Euro Stoxx 50 retreats at least 5.0% in a single sesión, on average the S&P 500 has dropped by as much as 6.0% over the following week, according to Bloomberg data.
In the subsequent month, the S&P 500 troughs after a loss of about 8.3%.
Results of the referendum showed a Leave win at 52%, with Remain at 48%. London, Northern Ireland and Scotland backed Remain, while the rest of England and Wales opted to leave.
As investors fled to safety, gold, the dollar and US Treasuries all benefited. The pound slid to a 31-year low during the session and front month gold futures rocketed $66.10/oz.
The yield on the 10-year US Treasury bond hit its lowest level since 2012. Yields move inversely to prices. Some analysts said Brexit might keep the Federal Reserve from hiking rates in 2016.
In oil markets, West Texas Intermediate dropped $2.66 to $47.64 a barrel.
In terms of sectors, the most impacted were Travel&tourism (-10.28%), Non-ferrous metals (-10.11%) and Real estate services (-8.91%).
Banks were among the most heavily-traded issues on the NYSE, including ADRs in Santander (-20.21%) and Barclays (-20.48%).
British Prime Minister David Cameron announced his resignation on Friday, saying the UK needed "fresh leadership" to "steer the country" out of the EU.
The Bank of England was quick to respond to the referendum outcome, saying it was "monitoring developments closely" and had undertaken "extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks".
In addition, the European Central Bank pledged to provide additional liquidity, if needed, in euro and foreign currencies.
Bank of America Merrill Lynch said: "Once the dust of the knee-jerk market reaction settles, we think that the UK's economy will clearly be the main victim, but also that the shock for the Euro area and the global economy is likely to be significant. Policy responses will be needed beyond the 'first-aid' remedy market disruption normally requires."
Britain's vote for Brexit prompted some analysts to re-think their expectations on the timing of the next interest rate hike.
ING pointed out that its view on the timing of the next Fed rate rise had always been contingent on a Remain vote, as financial market stability was one of the three conditions for the US central bank to hike.
"We believe US financial market tightness will increase significantly following the UK's Leave vote, irrespective of what is happening elsewhere in the US economy." |
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| | Newspaper Round Up | | Monday newspaper round-up: Soros and Roubini, bank Brexit, National Grid Disintegration of the European Union is practically irreversible after Britain's decision to leave, according to the man who banked a £1 billion profit after betting on a collapse in the pound in 1992. George Soros, the financier who also predicted that last week's result would send the pound falling, said that the decision was fraught with further uncertainty and political risk for Britain "because what is at stake was never only some real or imaginary advantage for Britain but the very survival of the European project". - The Times
George Osborne will on Monday attempt to calm financial markets in the wake of the Brexit vote by providing reassurances about the UK's financial and economic stability. In a 7am statement, the Chancellor is expected to lay out a series of new measures to "protect the national interest" in the coming months, as the Treasury seeks to avert another day of economic chaos following the result of the European Union referendum. - Telegraph
The British pound sank a further 2 per cent to $1.3395 in early morning European trading on Monday as investors continued to digest the fallout from the UK's decision to leave the EU and sought haven assets such as government bonds and gold. The pound's fall came on top of Friday's plunge that saw it close 8.1 per cent lower for its biggest one-day drop on record. - Financial Times
Officials in Japan and China warned of new threats to the health of the UK and global economy in the aftermath of Britain's leave decision as the pound continued to fall and Asian markets on Monday struggled to recoup heavy losses. Japan's stock market put on a show of resilience - the Nikkei 225 rising more than 2% by early afternoon - as prime minister Shinzo Abe held an emergency meeting early on Monday and instructed the Bank of Japan to do all it could to stabilise financial markets. - Guardian
Britain is facing the stark reality of crumbling influence on the world stage after turmoil triggered by the vote to leave the EU plunged the UK into domestic political instability. EU leaders were preparing a timetable that would see the UK leave the bloc by the beginning of 2019 in the rapidly accelerating fallout from last Thursday's referendum that shook the postwar European order, rocked financial markets and claimed the scalp of British prime minister David Cameron. - Financial Times
London-based banks could be blocked from selling services to the European Union's 500 million consumers if Britain fails to secure access to the single market in exit talks, the governor of the French central bank has warned. Britain's membership of the EU means that lenders, fund managers and investment firms based in the City have a so-called passporting right that allows them to operate across the Union. - The Times
Brexit is just the "tip of the iceberg" of popular resentment against the EU that could destroy the entire bloc, economists have warned. Nouriel Roubini said the decision to leave the EU could trigger the "beginning of the disintegration" of the UK, eurozone and wider trading area. - Telegraph
The opposition Labour party is embroiled in its bloodiest civil war for decades after the departure of at least 12 members of the shadow cabinet, with another 20 resignations from the front benches expected on Monday. Jeremy Corbyn sacked Hilary Benn, his shadow foreign secretary, at 1.30am on Sunday morning, initiating a deadly battle with most of his MPs at Westminster. By the evening of the same day there had been a wave of resignations from the Labour leader's top table, prompting fears for the very future of the party. - Financial Times
Global economic policy needs an urgent overhaul to cope with a world of persistently high debt and weak productivity and in which monetary policy is out of ammunition, the Bank for International Settlements believes. The Swiss-based institution says that governments must focus more broadly on controlling inflation and should clearly establish central banks' limits to shake off the trap of debt-fuelled growth. - The Times
Local authorities have been redrawing care contracts amid concerns that a FTSE 250 public sector outsourcer led by Baroness McGregor-Smith, the Conservative peer and Whitehall adviser, was not paying the minimum wage, The Times has learnt. The homecare business of Mitie has been dogged by claims it has not paid workers for travel time for care appointments. - The Times
David Cameron has been urged to make a swift decision on a new runway in the southeast amid fears over a collapse in economic confidence triggered by the Brexit vote. Business leaders have told the prime minister to rule on an expansion of Heathrow or Gatwick immediately rather than delaying until his successor is in place. Devon and Carmarthenshire county councils are among several local authorities to have tightened their contracts in the wake of the scrutiny, correspondence obtained under the Freedom of Information Act shows. - The Times
Britain has been warned that it is spending less on infrastructure than the nation needs to secure future economic growth, even before leaving the European Union. McKinsey Global Institute, a management consultancy, said that spending on transport, power, and technology "continues to fall short of the world's ever-expanding needs". Its analysis concluded that Britain had a 0.4 per cent gap between its estimated requirement for infrastructure needs before 2030 and its present spending.- The Time
The costs of managing the UK's electricity supplies could double to £2bn a year within five years due to the growth of renewable technologies, a senior National Grid official has forecast. The company already spends just over £1bn a year on "balancing services" to ensure power supply and demand are matched, that the grid is not overloaded, and that supplies are at the correct voltage and frequency across the network. - Telegraph
The decision to leave the European Union is expected to claim its first victims today, when hedge funds and other financial institutions reveal deep losses suffered in the volatile markets on Friday. Senior bankers and traders said that the 11 per cent swing in the pound, a move not seen since 1967, had triggered margin calls that hit several smaller hedge funds and may have wiped out others. - The Times
Sajid Javid will meet business chiefs in London on Tuesday for a crisis summit to discuss the consequences of Brexit. The business secretary will assemble company executives and leaders of industry bodies in an attempt to allay concerns that years of uncertainty will follow Britain's vote to leave the European Union last week. - The Times | | |
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