Market sees Black Swan — Britain votes to leave EU
- Almost every index around the world end up with huge loss Friday. Banks across Atlantic Ocean lead the market plummet. Big banks have large FX exposure and debts in EU, which may harm their tolerance for future market turmoil. Also, the expectation that Fed won’t raise rate this year will press down banks’ profitability. Not all companies lose for “Brexit”, BP and Shell are two of the winners since strong dollar and weak pound increase their profitability.
- British Pound drop 8.1% to 1.3676, to its lowest level since 1985. US Dollar Index surge 1.7%. Emerging-market currencies had their hardest hits on “Brexit”, since investors are running away from risk.
- In the commodity market, US oil down 4.9% to $47.64 a barrel. Benchmark Brent down 4.9%. With dollar rise, oil become more expensive, which leads to a price drop. Also, market fears that “Breixt” will decrease European’s demands for oil and UK’s oil production may also suffer. But others think this price move is transit since UK’s leave will not affect supply and demand globally. Cheap oil will increase the demands from emerging-market in Asia. Grains future drop because strong dollar worsen the output.
- Gold rise 4.43% to 1319.1, two years high.