Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Brexit Fallout

European Opening Calls:

Euro Stoxx 50 2830 -208

FTSE 5862 -476

DAX 9575 -682

CAC 4158 -308

Brexit Fallout

The surprise “Leave” victory in the UK’s Brexit referendum has changed the calculus of global markets. We have seen the biggest intra-day volatility in the pound on record, as evidenced by it hitting a yearly high and yearly low within hours of each other. But the biggest concern for markets is what the implication of Brexit will be for the European Union. There is a strong incentive for the EU to make the UK’s exit as punitive as possible to severely diminish the risk of other members making the same move.

Speculation in the markets will increasingly focus on the weakest links in the EU, those who are most likely to elect to leave and those who would suffer most under the breakup of the EU. The PIGS (Portugal, Italy, Greece, Spain) are likely to fall under the intense focus of speculators again. Spain also has elections on 26 June and this Brexit vote will likely have a major influence on its outcome.

It is also very uncertain what this will mean for Britain and what sort of timeframe Britain’s exit from the EU will take. Many expect Prime Minister David Cameron to stand down, possibly to be replaced by either Michael Gove or Boris Johnson. But whoever becomes the UK Prime Minister, the primary concern will be quelling market concerns and providing a steady timetable for Brexit to the market.

Safe havens have been surging, the Japanese yen has strengthened 4.4%, Gold has rallied over 6%, and Bitcoin is up 10%. There is increased speculation that the Bank of Japan (BOJ) will be forced to intervene to stem the strength in the yen, particularly given it a one point broke below USD/JPY 100 – a red line for the BOJ.

Coordinated intervention by global central banks and G20 governments may be necessary to stem the selloff. But when there is so much division in Europe at the moment it is difficult to see how they can come together and present a unified case that will reassure markets.

For Australia this is likely to lock in the Turnbull Liberal government’s election as the economy and economic security will probably rocket to the forefront of voters concerns. While it’s difficult to foresee the exact Brexit fall out, there’s now a chance we see a RBA rate cut at the 5 July meeting and were that to happen another one or two more rate cuts could follow it in 2016.

© Scoop Media

Business Headlines | Sci-Tech Headlines


Barfoot & Thompson: Auckland Rental Prices Inch Up Again, But Upward Trend Could Ease In Coming Months

Data from nearly 16,000 rental properties managed by real estate agency Barfoot & Thompson shows Auckland’s average weekly rent rose by $6.12 (or 1 percent) during the second quarter... More>>

ComCom: Draft Report Says Regulatory System Favours Established Building Products
The Commerce Commission’s draft report into competition in the residential building supplies industry has identified two main factors negatively impacting competition... More>>

Statistics: Annual Wage Inflation Rises To 3.4 Percent
Wage inflation, measured by the labour cost index (LCI), was 3.4 percent in the year ended June 2022, while average ordinary time hourly earnings rose 6.4 percent, Stats NZ said today... More>>


Heartland: Retirees Facing Pressure From Higher Cost Of Living And Increasing Debt In Retirement

Heartland has seen a significant increase in Reverse Mortgages being used to repay debt. Among the most affected by the increasing living costs are retirees, many of whom are trying to get by on NZ Super alone... More>>

APEC: Region’s Growth To Slow Amid Uncertainties And Crises
Economic growth in the APEC region is expected to slow this year amid soaring inflation, a protracted war in Ukraine and heightened uncertainties, on top of the continuing impact of the pandemic and virus mutations that are draining resources, according to a new report by the APEC Policy Support Unit... More>>

Financial Markets Authority: Survey Sheds Light On New Zealanders’ Experiences With Financial Sector
Most New Zealanders are confident in their ability to make financial decisions, but only one-fifth say they are in a secure financial position... More>>