Sell-off abates as Brexit
opinion seen shifting
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[June 17, 2016]
By Marc Jones
LONDON (Reuters) - Shares, oil and bond
yields rose on Friday after a tumultuous week and as campaigning for
Britain's EU membership referendum next week was suspended after the
killing of a pro-"Remain" politician.
European bourses climbed more than 1 percent at the end of a
third straight week of losses and benchmark 10-year German bond
yields clawed back up to the zero mark as investors' risk averseness
Wall Street was expected to start flat however, having snapped a
5-day losing streak on Thursday and with housing data and Canadian
inflation figures due to be released.
Campaigning for Britain's June 23 EU referendum, which overshadowed
this week's U.S. and Japanese central bank meetings, was put on hold
after British lawmaker, Jo Cox, was murdered on Thursday.
The recently volatile pound rose 0.5 percent to $1.4277 with
analysts noting that Cox's death could generate sentiment in favour
of remaining in the EU.
"There was this incredible melt down in risk sentiment (yesterday)
where everything seemed to be aligning and then this terrible
incident in England seemed to be the root of everything reversing,"
said Saxo Bank's head of FX strategy John Hardy.
"I think everyone is still in a state of shock as to what this
means. Does it tilt the odds on a vote next week? It's hard to know
but it certainly disrupted what the market was doing."
Oil, which has been a major driver of the sharp swings in global
markets this year, also helped shift the mood as it rose for the
first time in seven sessions. That decline has pushed prices down by
Euro zone banking stocks rebounded almost 4 percent having hit
a four-year low - with all-time lows for banks including Deutsche
Bank and Credit Suisse - on Brexit worries and sub-zero interest
rates, which are eating into earnings.
Gold also advanced, rising 0.4 percent to $1,283 an ounce after wild
swings overnight. It had surged to a near-two-year high of more than
$1,315, only to slump 2.8 percent by the end of the session. It was
on track for a third week of gains.
"Leading into the Brexit vote, we expect gold to remain around
current levels between the $1,270-$1,300 range. But after then all
bets are off as everything depends on the results of the
referendum," ANZ commodity strategist Daniel Hynes said.
DIGGING FOR TREASURIES
Ten year U.S. government bond yields were hovering at 1.60 percent
ahead of U.S. trading, tumbling from 1.86 percent at the beginning
of June as investors made a dash for safe-haven assets.
They had touched close to 1.50 percent on Thursday, the lowest for
four-years and that has dovetailed with 10-year yields going
sub-zero in Germany, 15-year yields doing the same in Japan and even
30-year yields in Switzerland.
"This is latest chapter of a long running theme that is going to
continue to play out," Hermes chief economist Neil Williams said.
[to top of second column]
A man walks in front of a screen showing today's movements of Nikkei
share average outside a brokerage in Tokyo, Japan, June 2, 2016.
"We are going to live in this world until the major central banks start turning
the taps off, but my question is how they are going to do it."
Overnight, Asia's main stock markets saw modest gains although that was little
consolation after a difficult week that saw both weak Chinese data and the Bank
of Japan hold off on more stimulus but talk loudly about currency intervention.
China's CSI 300 index made 0.5 percent and the Shanghai Composite added 0.4
percent. That helped them cut weekly losses to 1.7 percent and 1.5 percent
Hong Kong's Hang Seng gained 0.5 percent, but suffered a more than
4-percent loss on the week, emerging markets worldwide were down 2.3 percent for
the week while Japan's Nikkei ended it down more than 6 percent despite a 1.1
percent rise on the day.
"Continued inaction by the BOJ in the face of these (global) risks only
reinforces the market's suspicions that the central bank is running out of
policy options, feeding back into a stronger yen," HSBC economist Izumi Devalier
said in a note.
The dollar had clawed back some lost ground against the yen. It steadied at
104.23 yen <JPY=> but was still down 2.4 percent this week, having dropped to
103.555, its lowest since August 2014. [FRX/]
The euro meanwhile added 0.3 percent to 117.39 yen. It too was down 2.4 percent
for the week against the Japanese currency having hit a 3-year low of 115.51 on
Japanese Finance Minister Taro Aso said on Friday that he was deeply concerned
about "one-sided, rapid and speculative moves" seen in the currency market and
would respond if necessary to ensure stability in currencies.
Officials from the Ministry of Finance, the Bank of Japan and the Financial
Services Agency planned to hold a meeting on Friday to discuss financial
markets, Aso said.
(Editing by Louise Ireland)
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