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Daily Market Analysis
Rush for the Exits

July 6, 2016

Good morning,

The post-Brexit drama in financial markets continues to unfold as investors scramble for safety. Against a backdrop of fear and unease government bond yields across the world continue to dip into uncharted territory with US ten year treasuries moving towards never seen before lows while Japanese and German bonds inched further into negative territory.

As trading in Asia commenced the sterling continued to lose its lustre, plumbing 31-year lows against the greenback while market jitters continued to lift the yen as investors sought out the safety of Japanese bonds and equities across the entire region saw red.  Looking southwards the Aussie dollar is treading water in a sea of volatility as the Reserve Bank of Australia decided to stay pat with today’s rate announcement, choosing to reserve their monetary ammunition even in light of the growing global uncertainty.  As for its kiwi cousin, the New Zealand dollar has lost ground against the greenback as the combined effects of weaker sentiment and commodity prices take the NZ dollar lower.

Looking to Europe the story is much the same, with investors shocked by the halting of redemptions in several UK property funds, the exodus towards safe haven assets has seen equities across the region take a dive.  German factory orders and European Retail PMI data both came in worse than expected, data from the real economy has only added to the angst created by the political situation in the United Kingdom.  As of yet, the latest round of angst has claimed both the pound and the euro with both currencies trading lower against their pairs while the Swiss franc is trading higher benefiting from its safe haven status. There may yet be a reprieve as Bank of England governor Mark Carney is expected to speak later today and outline his plans for assuring financial stability which may provide a salve to skittish investors.

Ahead of the opening bell in North America, markets stateside have not escaped unscathed with the latest round of negativity expected to continue whilst equity futures across all indices flash red. In terms of real data, we have services and non-manufacturing PMI data for the United States to be released later in the morning, despite this and in light of today’s scheduled release of FOMC meeting minutes trading is likely to remain sentiment driven with the safe haven assets of US treasuries favoured over equities and commodities while the latest trend of US dollar strength against the loonie should continue barring any optimism from the Fed.

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