Morning Briefing 8211 June 10th 2016

0936 BST

• The risk-off tinge to overnight moves has carried on at the European open on Friday with bond prices—particularly in Japan and Germany—gold and the yen, all ‘safe havens’, close to Asian session highs, whilst stocks and oil slide quite definitively. There are many reasons for investors to be less than cheerful right now and after gold’s consolidation in May, prices have maintained a positive tone so far this month. There was a pause at $1,268/oz. for the spot as I wrote this, after it rose about 6% since last Friday. There does not appear to be a distinct single trigger for the safety bid. Instead typical Friday caution combined with rekindled Brexit-vote market stasis and existing background anxiety from last week’s jobs shocker (and Yellen’s customary sphinx-like assessment of the impact of the rates outlook) lead investors to take a break.
• Moving to referendum concerns, and the primary arena that these are expressed—the currency market—primarily sterling, the initial picture of out-and-out declines by the latter is evolving. The pound is weak, but by no means collapsing in an unreconstructed manner. It could not maintain the best levels above $1.455 from its comeback by a poll-fuelled scare over the weekend, but it has not needed well established support around $1.433 this week either. This suggests a constructive outlook, especially in the event of a Remain outcome. There are few notable news points on the Brexit front. Many overnight developments were intriguing rather than material. Note, sterling barely moved an inch during last night’s TV debate between SNP leader Nicola Sturgeon, Energy Secretary Amber Rudd, Boris Johnston and others, despite the rather colourful attacks on the Leave frontman. Again, news that 80% of BT.com readers back Brexit probably says more about demographics of the UK incumbent telecom’s news site, than wider voting intentions.
• The lack of any new strong shifts in the voting picture from 50/50 with a small bias towards Remain has buttressed both Britain’s currency, and maintained the tone of euro crosses. They have largely traded sideways this week, apart from against the yen which hit a new 3-year low against the single currency overnight with 119.00 now a key target, and the Swissie (CHF) which has advanced a respectable 1.8% in five days.
• This sense of calm only goes so far though: sterling protection is in demand. One-month option costs are at seven-year highs
• The dollar has actually become more resilient over the last 24 hours regardless of recent US economic concerns, suggesting a corrective move instead of a sentiment shift. The dollar index was 0.2% higher at the time of writing though set for a second weekly decline.
• As noted stocks are weak, with the DAX taking the most heat as per our view that it’s the most vulnerable major index right now. It was down 1.6% at online time, the FTSE was having its worst day of the week too, down 1.1% and Dow Jones futures were down 0.6% after S&P 500‘s retreat last night, which looked to be avoiding another attempt, for now, to retake nearby all-time highs.