U.S. stock index futures were fractionally higher (SPY +0.05%) this morning as investors held off from making big bets, a day ahead of Britain's Brexit vote Thursday. Gold fell to a ten-day low despite a surge in gold demand in the UK. Janet Yellen quashed a July rate hike yesterday in her Humphrey-Hawkins testimony and WTI crude has once again joined Brent above $50 a barrel.
Here is the current market situation from CNN Money
European markets are broadly higher today with shares in Germany leading the region. The DAX is up 1.09% while London's FTSE 100 is up 0.85% and France's CAC 40 is up 0.69%.
LONDON (Reuters) - Global investors are once again dusting off studies of the 1930s as fears of protectionism, nationalism and a retreat of globalization, sharpened by this week's Brexit referendum, escalate anew.
HANOVER, Germany (Reuters) - Volkswagen executives apologized for the diesel emissions scandal to try to placate angry shareholders at a meeting on Wednesday and pledged change to haul the carmaker out of its worst business crisis.
LONDON (Reuters) - Oil rose further above $50 a barrel on Wednesday supported by an industry report that showed a large drop in U.S. crude inventories and a boost in investor risk appetite ahead of Britain's referendum on EU membership.
TOKYO (Reuters) - SoftBank Group Corp said Wednesday that Ken Miyauchi, head of the group's Japanese telecommunications operations, would become president and chief operating officer to replace Nikesh Arora.
LONDON (Reuters) - London-based bankers considering a possible relocation if Britain votes out of the European Union would suffer pay cuts of up to 80 percent if they were to move to Frankfurt or Paris, data from salary-benchmarking site Emolument showed.
HONG KONG/SINGAPORE (Reuters) - McDonald's Corp has received more than half a dozen bids for its China and Hong Kong stores, including offers from Beijing Tourism Group, Sanpower and ChemChina, in an auction that could fetch up to $3 billion, people familiar with the matter said.
Gold fell again today despite very robust physical demand in western markets and especially the UK. Gold fell to a ten-day low despite a surge in gold demand in the UK.
Expectations that Britain could vote to leave the European Union in Thursday's referendum have receded somewhat but remain and this is leading to very significant UK gold demand.
Over the last 5 days, we have had record demand from both Irish and UK retail and high net worth clients acquiring bullion in advance of the important poll. Other bullion dealers in the UK and indeed mints are reporting similar surging demand.
The Royal Mint has seen demand for gold "rocket" as investors seek sanctuary in safe haven gold due to increased volatility in stock and fx markets and concerns about the outlook for the UK economy and sterling (see News).
Two opinion polls yesterday showed the "Remain" camp had recovered some ground in the referendum debate though a third poll found those wanting to leave were ahead by a whisker.
As ever, speculative money in the futures market appears to be dictating gold prices in the short term. We expect the very robust physical demand will lead to a sharp bounce in gold prices in the medium term.
Gold News and Commentary
Gold Holds Two-Day Slump as Investors Count Down to Brexit Vote (Bloomberg)
Fed cautious on rates due to Brexit, hiring slowdown: Yellen (Reuters)
Gold Posts Biggest Loss in Four Weeks as Chances of Brexit Ebb (Bloomberg)
Switzerland gold exports jump 20% to 177.3 mt in May, highest this ...
While SocGen's Albert Edwards has opined previously on the topic of Brexit (with an apparent interest in a "leave" outcome), overnight he once again revisits the only thing that matters to markets over the next 24 hours, and looks at the possible outcome of a second "Black Wednesday", an event that could send the sterling plunging, from the prism of George Soros' recent op-ed predicting doom and gloom should the British currency rapidly devalue, and concluding that he disagrees:
"thinking about this from the point of view of my Ice Age thesis, where interest rates cannot be normalised because of economic weakness and deflation pressures persisting throughout this recovery, I would have thought a 20% sterling devaluation is exactly the antidote needed in the current circumstances."
We will have more to say on Edwards' comparison of Brexit to Black Wednesday and how the potential outcome, like back in 1992, may actually end up being a blessing in disguise for the UK economy, should Leave end up winning. Ultimate outcome for the UK aside, however - and Edwards believes that the pound will "fall with or without Brexit" - In this we will focus on what according to the SocGen strategist is a far bigger risk to the global economy - the same risk that defined risk for the entire second half of 2016: China's devaluation, which has returned, only this time it is far more strealthy which may explain why the market has largely ignored it for now.
Here is Albert:
The UK referendum is neck and neck. Commentators think it so close that the deciding factor could be whether it rains on Thursday - with rain seen reducing the Remain vote. How mad is that? One year ago we wrote that the UK economy was a tic ...
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