European & U.S. markets lower, JPY strengthens, GBP falls on Brexit concerns, ASX SPI200 futures 47 points lower

European and U.S equity markets closed lower on Thursday with the DAX30 (-0.98%), FTSE100 (-0.40%), S&P500 (-1.20%) and the Nasdaq100 (-1.51%) all ending the session down. It was a quiet night for economic data, with the only notable release being US initial jobless claims (Apr) which came in at 267,000 vs an expected number of 270,000. The USDJPY rate continues to fall as the Yen appreciates, which is often highly correlated with a "risk off" environment, meaning investors are likely to continue to move into safe haven assets. The first chart below highlights the USDJPY currency pair which has declined approximately 11.28% since the beginning of the year, from the 120 region to below 109 in the face of record stimulus measures from the Bank of Japan (BOJ). Speculation is now beginning to emerge as to if and when the BOJ will step in to weaken the currency. Spot gold, another safe haven asset also traded higher overnight, up US$18 (+1.47%).

Keeping with the currency theme, the second chart below highlights the GBPEUR rate which has been in free fall since early December 2015 on "Brexit" concerns, down 8.99% year to date. Leading into the June 23rd vote we can expect continued volatility in the pound as investors hedge themselves against a possible exit. While leaving the Euro-Zone would have disastrous effects on the British economy, given the issues the bloc has faced since the GFC, it is unsurprising that there is support for leaving. A recent poll by the Telegraph suggests the vote will be close, with those in favour of remaining in the EU at 51% while those wanting to leave at 44%, leaving 5% undecided.

ASX SPI200 futures are trading down 47 points in overnight trading so we can expect a weaker open this morning. 

Data Releases:

·         Swiss Unemployment Rate (Mar) 3:45pm AEST

·         Swiss CPI (YoY Mar) 5:15pm AEST

·         Canadian Unemployment Rate (Mar) 10:30pm AEST

Source: Rivkin, Bloomberg, Updata
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This article was written by James Woods – Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3600.