European Equities Higher As Brexit Vote Looms, Janet Yellen Highlights Weak Productivity Growth, ASX SPI200 Futures Down 16 Points

European equities gained on Wednesday ahead of the Brexit referendum vote as a YouGov poll showed Remain leads 51 to 49 which excludes undecided voters, while two other opinion polls conducted by TNS & Opinion suggested a narrow lead for Leave. Meanwhile betting odds compiled through Oddschecker currently suggest only around a 29% chance of a Brexit, both the FTSE100 & DAX30 were +0.56% & +0.55% higher respectively as the Pound reversed initial gains against the US Dollar to finish relatively flat, down -0.03%. While polls will close at 10pm local time it won’t be until around 7am on Friday local time that we will have the final outcome although announcements will occur throughout the night. Unlike general elections there will be not exit polls announced on the day as broadcasters are unable to ensure the polls are accurate given there is no baseline to compare against. Regardless of the outcome we can expect volatility across markets following the announcement and I would caution those trading during this time of the heightened risk of prices gapping as well as thin liquidity and widening spreads.

US equities closed lower as Fed Chair Janet Yellen concluded her two day testimony on Monetary Policy to the House Financial Services Committee where once again she highlighted concerns about productivity. “It is a very serious matter that productivity growth is so slow” echoing recent comments from Philadelphia Fed President James Bullard who recently cut his interest rate projections to one hike in 2016 and none through to 2018 citing low productivity as well. The first chart below highlight US Non-farm business sector output per hour of all persons which reflects this productivity, as you can see over the past four years it has remained very low by historical standards and this suggests rates will remain lower for longer compared to previous rate hiking cycles which will continue to be support for equities. Both the S&P500 & Nasdaq100 dropped -0.17% & -0.20% respectively as the US Dollar index fell -0.32%.

Commodities were generally lower on Wednesday led lower by WTI & Brent crude oil down -1.45% & -1.46% respectively as data from the Energy Information Administration showed a less than expected decline in US stockpiles of 917,000 against 1.5 million expected. Natural gas pulled back from the highest level since October 2015 shown on the second chart as unusually warm weather across the US has increased demand from electricity providers over the past few weeks. Elsewhere Copper and Iron Ore both gained +0.85% & 2.80% while precious metals Spot Gold & Silver declined -0.15% & -0.14% each.

Locally the ASX200 closed flat, down -0.06% while the market looks set for a softer open this morning with ASX SPI200 futures down 16 points in overnight trading. If you’re interested in trading global markets and still need practice, click here to open a free $100,000 Rivkin Trader account. 

Data releases:

·         Japanese Nikkei PMI Manufacturing (MoM Jun) 12:00pm AEST

·         German Markit Manufacturing, Services & Composite PMI (MoM Jun) 5:30pm AEST

·         Euro-zone Markit Manufacturing, Services & Composite PMI (MoM Jun) 5:30pm AEST

·         US Initial & Continuing Jobless Claims (Jun 11th & 18th) 10:30pm AEST

·         US Markit Manufacturing PMI (MoM Jun) 11:45pm AEST

·         US New Home Sales (MoM May) 12:00am AEST


Source: Rivkin, Bloomberg

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This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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