Financial Markets
Global oil demand will continue to surprise to the upside over the balance of the year - growing at a rate of 1.6 MMb/d - following an unexpected surge over the first five months of 2016.
There are not two possibilities in today's vote, but four: Clear Remain; Narrow Remain; Narrow Leave; Clear Leave. We discuss the distinct repercussions from each.
EM/China oil demand is not as strong as some reputable energy sources have indicated. As and when the oil market shifts its attention from supply cutbacks to subdued EM/China oil demand, oil prices will relapse. Renewed drop in commodities prices and poor growth in EM will weigh on EM risk assets going forward.
The secular stagnation narrative is gaining traction amongst the FOMC. Expect further downward revisions to longer run FOMC interest rates forecasts, toward levels already discounted in the Treasury curve.
We prefer to fade the recent fall in yields by moving to neutral on U.K. Gilts and underweight Australia, while maintaining a benchmark overall stance on portfolio duration.
The sinking global credit impulse warns that reflation has not overwhelmed deflationary forces. Financials will continue to suffer, while utilities and retail drug stores will benefit.
The Fed has reason to delay the next rate hike until at least September, even if volatility subsides after the June 23 Brexit vote.
This fact sheet outlines what you need to know ahead of the U.K.'s referendum on EU membership. The "Leave" camp has taken the lead, and while the polls likely overstate its position, the status quo faces serious risks.
The Brexit vote is a coin toss. We introduce a simple model to estimate the effect of a "stay" or a "leave" vote on various currencies and assets. A "leave" vote could cause GBP/USD to fall to 1.32 or less, creating a tactical buying opportunity. Extreme GBP implied volatility suggests that selling vol is attractive. The Fed decreased its rate projections.
Increasing uncertainty over the Brexit vote will keep the Fed from raising its overnight policy rate at this week's FOMC meeting, but it may not keep the USD from rallying in the event of a decisive win for Brexit advocates on June 23.