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Markets are having something of a turnaround Tuesday, the Brexit political fallout continues, and Draghi calls for global policy alignment. Here are some of the things that people in markets are talking about today.
Markets, pound rise
After taking a pounding over the last two trading sessions, global markets and sterling are recovering somewhat this morning. Overnight, the MSCI Asia Pacific Index was little changed, having traded 1.2 percent lower earlier in the session. Japan's Topix index closed 0.1 percent lower with optimism over further stimulus increasing following a report in the Nikkei newspaper that the chairman of Prime Minister Abe's party proposed a 20 trillion yen package. In Europe, the Stoxx 600 Index had rallied 2.5 percent by 5:40 a.m. ET while the FTSE 100 was 2.3 percent higher. The pound also rose, gaining 1 percent to trade at $1.3350 at 6:00 a.m. ET as the record selloff following the U.K. referendum abates. S&P 500 futures were 0.7 percent higher.
Away from today's market bounce, the fallout from the Brexit referendum continues. U.K. Prime Minister David Cameron, who has already announced his intention to resign, is due to attend a dinner with his fellow EU leaders this evening with questions over the timing of the invoking of Article 50 of the Lisbon Treaty remaining unanswered. This morning, in a speech to the German parliament, Chancellor Angela Merkel warned that there could be no "cherry-picking" by the U.K. in negotiations over the country's future relationship with the EU. Ratings agencies have also responded to the vote, with both S&P Global Ratings and Fitch Ratings downgrading the U.K. yesterday.
Draghi calls for coordination
European Central Bank President Mario Draghi has called for greater alignment of policies to address the root causes of the challenges facing the world's economies in a speech this morning that made no mention of the U.K. vote. At his introduction to the annual ECB economic forum in Portugal yesterday he said that "sadness" best described feelings over the referendum result. Federal Reserve Chair Janet Yellen, who was scheduled to attend the forum, pulled out yesterday without explanation.
The Shanghai Stock Exchange is no longer top-dog in Chinese equities as Shenzhen's Small and Medium Enterprise Board is now leading it on turnover. Worryingly, the change of fortune has been mostly driven by a huge drop in volumes on the Shanghai exchange, rather than any massive increase in Shenzhen turnover. For the moment, Chinese authorities are probably more concerned about the unraveling of their yuan policy in the aftermath of the Brexit vote, with the currency slumping 1.2 percent to a five-year low versus the dollar and rallying 2.4 percent against the euro since last week's vote. Analysts at Goldman Sachs Group Inc., meanwhile, are looking at the domestic bond market for clues as to the strength of the Chinese economy.
U.S. politics gets a turn in the spotlight
Presumptive Democratic Presidential nominee Hillary Clinton may face a test today as the House Benghazi panel is set to unveil its long-awaited report later. CNN is reporting that the panel will say that she should have realized the risks involved in the mission. Polls are showing Clinton maintaining a strong lead over Republican Donald Trump ahead of the report release.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Odd Lots Podcast: The highway built by oil markets and political intrigue.
- The story of Britain's biggest insider-trading trial.
- Imagine the U.K. and EU three years after Brexit.
- Hoarding cash in vaults is now a pretty appealing option.
- World's top fortunes have fallen $196.2 billion since Brexit bombshell.
- Get ready to see this globalization 'elephant chart' over and over again.
- The merging worlds of technology and cars.