Oil, Asian stocks rally but Brexit fallout weighs on Europe
Analysts in Asia expect markets to be volatile in the short-term following the Brexit vote but the major indexes started the week more positive than last week ended.
The gains for equities were led by Tokyo’s Nikkei which closed up more than 2 per cent and Shanghai advanced 1.4 per cent. Other bourses were up, but more subdued, with the exception of Hong Kong which closed slightly lower.
In Europe, the story is still one of disbelief and uncertainty. Major indexes are trending lower following the large slump Friday but by far lower margins; less than 1 per cent compared to the 7 per cent drop in the previous session.
The UK’s finance minister George Osborne spoke early Monday in a bid to calm the markets.
He said that the economy was currently in a position of strength and that both the government and the Bank of England had the necessary tools to protect the country’s financial stability but acknowledged that growth would be hit.
Mr Osborne also ruled out an emergency budget at this time but said that action would need to be taken when the new prime minister is in place in the fall. The pound was lower again.
Wall Street and Toronto are expected to open lower.
UK will enter “mild” recession by 2017 says Goldman Sachs
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North America (previous session)
|US Dow Jones
||17,400.75 (-3.39 per cent)
||-2.64 per cent
||-3.04 per cent
||13,891.88 (-1.69 per cent)
||-1.51 per cent
||-6.19 per cent
Europe (at 4.30am ET)
||6,096.68 (-0.68 per cent)
||-2.78 per cent
||-9.11 per cent
||9,513.25 (-0.46 per cent)
||-7.36 per cent
||-16.84 per cent
Asia (at close)
|China CSI 300
||3,120.54 (+1.41 per cent)
||+1.90 per cent
||-28.04 per cent
||15,309.21 (+2.39 per cent)
||-9.06 per cent
||-26.06 per cent
Other Data (at 4.30am ET)
(+0.81 per cent)
(+0.40 per cent)
(+0.50 per cent)
Goldman Sachs said Monday that the UK would enter a “mild recession” by 2017 and also downgraded its expectation for global growth.
The downgrade of 0.1 percentage points sees global growth of GDP of 3.1 per cent for 2016.
For the UK, Goldman Sachs expects growth to be 0.5 percentage points lower at 1.5 per cent with the real impact of Brexit hitting in 2017 when the country’s growth will be just 0.2 per cent compared to the 2 per cent it has predicted pre-referendum.
The economy could be hit by harder terms of trade with the EU, the bank said, together with uncertainty.