In light of the significant volatility ensuing from the results of the EU Referendum in the UK, we share our initial thoughts on the evolving situation as well as provide an update on the strategy you are invested or have an interest in and the implications of the event on the broader investment landscape in Japan.
The immediate fallout from the Brexit win has been a strong flight to safety. US Treasuries rallied with the UST 10-year yield down to 1.44%, lower by 31 basis points (bps) on 27 June 2016.
Nikko Asset Management's Global Investment Committee’s post-BREXIT scenario, including market and economic targets, is on the moderately gloomy side.
Asia ex Japan equities declined by 1.3% in USD terms in May, largely on the back of currency weakness. Markets started the month under pressure, but later recovered on better-than-expected US economic data and recovering oil prices.
US Treasury yields remained largely unchanged in May. The impact of a disappointing US payroll figure was offset by the release of the US Federal Reserve’s April meeting minutes, which revealed that most policymakers favoured a rate hike in June should the US economy continue to improve.
Our Chief Strategist in Japan explains why Japan’s government debt situation is sustainable.
Our global rates and currencies strategist in Australia lays out his dovish Fed scenario as an alternative to our house view. In it, he expects the Fed to wait until September or later to raise rates, and states his case that the Fed’s actions do not affect US bond yields.
Our two leading Global Emerging Market debt experts, both based in London, weigh the possibilities of a sustained upturn in this long-suffering asset class.
Asia ex Japan (AxJ) equities declined by 0.9% in USD terms in April, largely on the back of currency weakness. Oil markets reached their highest levels since last November, while activity data in China improved.
US Treasury (UST) yields rose in April, as hopes of stabilization in the Chinese economy underpinned demand for riskier assets.