World stocks poised for
worst month since January
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[June 30, 2016]
By Vikram Subhedar
(Reuters) - European stocks and the pound held on to a third day of
gains as the immediate market flurry over Britainís vote to pull out of
the European Union settled.
The rebound was not enough, however, to offset the sharp losses suffered
in the aftermath of last week's vote which have put global stocks on
track for their worst monthly performance since January.
Renewed concerns over global growth and oversupply have also forced oil
prices onto the back foot again.
Wall Street shares were expected to open up 0.2 percent, following the
lead from European and Asian markets.
The MSCI All-Country World index <.MIWD00000PUS> was up 0.3 percent, but
is set to end the month down 1.6 percent, its worst month since a
troubled start to the year. It will also be the first time since 2011
that global stocks will have fallen for two successive quarters.
Worries that a weaker Chinese yuan could spark deflation, seen as a key
reason for the worst beginning to the year for global stocks, were
reignited on Thursday after Reuters reported that China's central bank
was willing to let the currency fall further.
"Since the beginning of the year investors have faced a series of macro
changes to the investment landscape," said Sean Darby, chief global
equity strategist at Jefferies, adding that Britain's decision to leave
the European Union last week was only the most recent shock to investor
The two-day selloff in the aftermath of last week's vote wiped more than
$3 trillion off the value of global stocks. They have recovered about
half of that over the past three sessions.
"No doubt global growth will take a short term hit, but it is not going
to result in a credit crisis," said Darby.
Bond markets see Brexit as another significant blow to the world economy
with German and Japanese benchmark 10-year government debt yields both
falling to historic lows below zero over the past week.
Ultra-low bond yields have brightened the appeal for equities and demand
for dividend-yielding stocks in defensive sectors such as healthcare and
food and beverage has risen sharply.
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A man is reflected in a stock
quotation board outside a brokerage in Tokyo, Japan, June 27, 2016.
BLUE CHIPS RECOVER
The U.K.'s FTSE 100 <.FTSE>, dominated by oil producers that pay out generous
dividends and global healthcare and consumer stocks such as AstraZeneca <AZN.L>
and Unilever <ULVR.L>, is back above levels before last week's vote.
The more domestically focused U.K. midcaps <.FTMC> extended its recovery though
remained more than 7 percent below pre-referendum levels underscoring concerns
over the local economy.
Shares of UK and European banks <.SX7P>, a center of concern since Britain
shocked global financial markets on Friday, have been the hardest hit during the
recent sell-off continued to underperform.
They remain the worst performing sectors this year in their respective markets
with Deutsche Bank <DBKGn.DE> hitting another record low after the bank failed a
U.S. stress test.
In currencies, sterling <GBP=D4> was up 0.2 percent at $1.3448, putting distance
between a 31-year trough of $1.3122 touched on Monday. It has still lost more
than 6 percent in the quarter.
Sterling added gains slightly after former London mayor Boris Johnson abruptly
pulled out of the race to become Britain's next prime minister.
The euro, another casualty in the days after Brexit, fetched$1.1150 after
reaching $1.0912 on Friday, its lowest since March.
Crude oil prices retraced some of their gains from Wednesday's sharp rally as
fears over strike outages in Norway abated.
Brent crude <LCOc1> fell 0.9 percent to $50.18 a barrel after jumping more than
4 percent overnight, thanks to a larger-than-expected drawdown in U.S. crude
Oil has mostly recovered what it lost after the Brexit shock. For the quarter,
Brent has risen 26 percent on hopes that declining production in some countries
would ease a global glut.
(Editing by Jeremy Gaunt)
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