Brexit pounds global markets

1. Brexit Pounds
Global Markets
RUMBLING CURRENCIES: POUND STERLING
MELTS TO 31-YEAR LOW; YUAN AT LOWEST
SINCE 2010Stocks in Europe & US singed
even as Asian markets survive heat, but
currencies bear the brunt

2. Contd…
Global financial markets continued to be roiled by the aftershocks of the UK's
decision to exit the European Union late last week. While Asian markets,
including India, managed to remain relatively resilient on Monday after the
selloff on Friday, currencies could not escape the bear assault with the
pound crashing to a 31-year low and China's yuan plunging to the lowest
since 2010.
Gold, considered a safe-haven asset, remained strong amid the uncertainty.
The jitters were felt in the US too, with the Dow Jones index opening 200
points down.
Shares of European banks such as Barclays and RBS extended losses, falling
between 9% and 14% to the lowest permissible limit, triggering a temporary
halt to trading. Fears over the health of European banks and the direction of
currencies will keep the stock and currency markets on edge in the coming
days, experts said.

3. Contd…
In India, benchmark indices on Monday ended unchanged from Friday after
swinging between gains and losses as investors and tra ders largely kept to the
sidelines, confused about implications of Brexit. The Sensex rose 5 points to clo se
at 26,402.96 whi le the Nifty gained 6 points to end at 8,094.70. The rupee closed
at 67.94 per dollar, almost unchanged from Friday as RBI intervention helped the
currency rebound from lows. Institutional activity in the stock market was tepid
with foreign and domestic investors net selling shares worth ` . 147 crore,
respectively, re . 146 crore and ` flecting the dilemma that prompted Deutsche
Bank to cut the Sensex target by 7% to 27,000.
“With no past precedent on a Brexit-like event and as a corollary no known
solutions, the markets will be grappling with what they fear and dislike the most -
uncertainty,“ said Abhay Laijawala and Abhishek Saraf of Deutsche Bank.
Retail investors seemed less bothered by the unease around Brexit as midand
smallcap shares were in the thick of action.

4. Contd…
The smallcap index rose 1.5% while the midcap index gained 0.8%. Gains in the
smallcap space were led by Sun Pharma Advanced Research, Ramco Cements, Bajaj
Hindusthan and Balrampur Chini Mills, which rose 3-14%.
“Stocks connected to (the) local economy have performed well. The rise has more
to do with local flows,“ said AK Prabhakar, head of research at IDBI Capital.
In Europe, stock markets tumbled with the FTSE 100, DAX and CAC 40 falling 2%
each. Sterling hit a 31 100, DAX and CAC 40 falling 2% each. Sterling hit a 31year
low, and yields on 10-year government bonds sank below 1% for the first time even
as British finance minister George Osborne called for calm. Rising Credit Default
Swap (CDS) prices of these banks reflected investor perception about the market's
confidence in these lenders to tide over the crisis. CDS is like an insurance against
defaults on loans and bonds. Since Thursday, CDS of RBS has gained 46%, that of
Barclays has risen 41% and of Deutsche Bank has moved up 25%.

5. Contd…
Continued turbulence in European and currency markets could soon hit
Indian shores, warned experts. “There could be further follow-through
repercussions from Brexit, which could lead to some global turmoil that may
impact India as well,“ said Mahesh Patil, co-chief investment officer, Birla Sun
Life MF .
The yuan on Monday dropped to its lowest against the dollar since late 2010
following the Chinese central bank's move to weaken the currency. It was the
steepest fall after the surprise one-off devaluation in August 2015.
At home, the rupee rebounded from its intraday low of . 68.06 on dollar
sales by state-owned banks -likely on ` behalf of the Reserve Bank of India.
Dollar sales were seen particularly around ` . 68 levels, which helped the
Indian currency end the day above the psychological mark. The rupee
touched an intraday high of 67.81, but dollar sales by RBI and a relatively
calmer local stock market ensured it was a quiet day of trade.

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