20 to 26 June: Dealing with a Hangover

Global markets were characterised by extreme volatility last week, with almost everyone calling the outcome of the UK’s Brexit referendum wrong:

• By Thursday night, confidence in a “remain” vote pulled the FTSE 100 up 5.26% on the week and saw Trade Weighted GBP hit the highest level since early February.
• On Friday’s market open, with a clear victory for the “leave” campaign, European equity markets opened down between 8-12% and GBP lost some 9% of its value against the USD to the lowest level since 1985.
• A rally over the day mitigated losses (FTSE 100 finishing only 3.15% lower), but European banks and UK property stocks still experienced crisis style losses (-18.02% Stoxx Bank Index, UK house builders down between 25-45%).
• Over the week, UK equities therefore actually finished higher (and sit 4% above their level upon the announcement of the referendum date in February) and 10yr Gilts hit all-time low yields at 1.10%.

The result has prompted strong, and often emotional, responses both in the UK and abroad. We consider the direct (UK domestic) and indirect (broader global) lessons and consequences in turn.

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