![]() Markets look to open to the downside after US holidays with risk off plays back in focus. Brexit news is still causing the markets hold on to safe haven assets and add to them in the form of Silver and German Bunds. There is little reason to expect this trend to stop without some decisions made by the UK in terms of leaving the EU officially. It seems that all party members will wait until the autumn elections to make a decision, and possibly the end of the year before starting article 50 proceedings. This will cause uncertainty as businesses will no doubt delay investments into the country’s economy and possibly start moving parts of their business out. There are some hoping that a turn of events will change the minds of the British people to elect someone who will have another referendum on the subject of leaving and make this all a bad dream. While this could be the case for the UK the mindset of the European Union and the Eurozone as a viable entity will still be in question. This will not be as easily reversible. The Brexit has already brought Italian Banks and the far left parties into focus as major threats to the Euro. Not to mention Greece. As spreads in the Eurozone widen across countries you will be able to see if the European experiment is starting to look shaky in the eyes of the markets. As long as German Bunds stay at negative yields out to the 10yr mark while Italian and Spanish yields continue to rise, it is safe to assume the markets are pricing in the two speed Europe or worse.
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June 2020
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