Market Commentary | UK voters go for Brexit

The Brexit decision left the global markets in turmoil. This uncharted path of a European Union without Britain sparked the sell-offs around the globe.

United Kingdom has decided to leave the European Union. 51.9% versus 48.1% voted to leave the EU. The Brexit decision left the global markets in turmoil. This uncharted path of a European Union without Britain sparked the sell-offs around the globe.

Asian Markets crashed with the news, with Nikkei dumping around 8%, triggering the trade circuit breaker in Tokyo. The Federal Reserve has another reason to defer the interest rate hike. U.S. equity index futures plunged and investors rushed for the safety of U.S. Treasuries, pushing the yield on the benchmark 10-year note below 1.5 percent.

Currency markets reacted to the news as the pound dropped to 1985 lows against the US Dollar, dipping around 10%. With the British Adieu vote, exporters could get better competitive prices compared to overseas. On the other hand, the costs of imports may rise. Tracking this, the Japanese yen and gold soared as this wave of risk aversion, prompted investors to invest in more save haven assets.

Other news

Japanese e-commerce company Rakuten Inc. invested an undisclosed sum in farming service provider Telefarm Co. Ltd. Aside from operating in the field of remote cultivation service for organic vegetables, the company has been managing an internet platform, which promotes farmers and connects them with their customers. This also provides farmers with stable revenue and sales channels. The investment gives Rakuten a stimulus to develop “innovative solutions to solve challenges in agriculture. “ The company has previously invested in Lyft and Pinterest, and purchasing companies such as Viber and video platform Viki.

Blackberry Ltd posted sales figures that fell short of analysts’ expectations. The boost in software revenue did not overcome the shrinking smartphone sales and inventory write down. The net loss in the first quarter amounted to $670 million, whilst the revenue was $424 million, which includes revenue from software and services. The company is pushing to increase software sales while trying to get profitable in the smartphone division.  The keyboard-equipped PRIV smartphone was one way but did not succeed, as it was too expensive.

The Canadian multinational aerospace and transportation, Bombardier announced the signing of an agreement with the government of Quebec for a $1 billion investment in the C Series Aircraft Limited Partnership. The assets, liabilities, and obligations of the C Series aircraft program will shift to the new company. Bombardier will hold 50.5% equity stake in the partnership and Investissement Quebec will hold the other 49.5%. Furthermore, the $1 billion Investment will be available in two equal tranches, one on 30 June 2016 and the other on 1 September 2016. Bombardier CEO Alan Bellemare said, “This will strengthen customer confidence in the aircraft and provide Bombardier with the financial flexibility needed to compete and win”.

In the Banking Sector, Scandinavia’s biggest bank Nordea Shares were down, after downgrades by analysts, frightened off investors. At one point, it was trading 5.2% lower and this was the biggest decline since mid-march.  The bank may need to turn to markets to raise capital after underestimating the level of risk in its loan book. Despite the reassurance from the CEO, this did not convince investors and the trading volume was more than 172 percent of the three-month average.

This article was issued by Roderick Duca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.