June 2016

• Global markets were highly volatile in June 2016 as uncertainty surrounding the UK referendum on European Union membership dominated sentiment.
• European and UK assets experienced sharp swings in the run-up to and immediate aftermath of the Brexit vote.
• Global risk aversion increased mid-month, driving demand for safe-haven assets such as government bonds and gold.
• Equity markets initially recovered from early losses as central banks signalled readiness to support financial stability if needed.
• The British pound fell sharply following the referendum result, triggering broader currency volatility across developed and emerging markets.
• Oil prices declined after earlier gains, reflecting renewed concerns about global growth and persistent supply imbalances.

Asia (ex. Japan)

Asian markets outside Japan were relatively resilient in June compared with European markets, although volatility increased as the Brexit referendum approached. Investors reduced risk exposure across export-oriented economies due to concerns about potential global spillovers from a UK exit from the European Union.

Chinese equities remained broadly stable, supported by ongoing policy measures aimed at maintaining liquidity and preventing financial tightening. Elsewhere in the region, India continued to outperform on strong domestic fundamentals, while South Korea and Taiwan were influenced by global technology demand and shifting currency conditions.

Europe

European equities experienced significant volatility in June, with markets reacting sharply to developments surrounding the UK referendum. Leading up to the vote, uncertainty weighed on financials and export-sensitive sectors, while defensive assets outperformed.

Following the referendum result in favour of leaving the European Union, markets initially sold off sharply before stabilising as policymakers signalled readiness to provide liquidity support. The euro strengthened modestly against sterling, while peripheral bond markets remained relatively contained due to expectations of continued central bank intervention.

United States

U.S. equities declined modestly during June as global uncertainty increased and investors reassessed the timing of Federal Reserve interest rate increases. Despite this, underlying economic conditions remained stable, with continued job creation and steady consumer demand.

The Federal Reserve maintained a cautious tone, delaying further tightening amid heightened global risks. Treasury yields fell as investors sought safe-haven assets, and volatility increased briefly in line with global equity market stress following the Brexit vote.

United Kingdom

UK markets were at the centre of global attention in June due to the European Union referendum. In the lead-up to the vote, equities were volatile and sterling weakened sharply as markets priced in uncertainty and potential economic disruption.

Following the vote to leave the European Union, sterling experienced a historic decline, while UK equities initially fell before recovering strongly, supported by expectations of monetary easing from the Bank of England. Gilt yields fell to record lows as investors sought safety and anticipated prolonged accommodative policy conditions.

Japan

Japanese equities were volatile in June as global risk sentiment deteriorated around the Brexit referendum. The yen strengthened during periods of stress, weighing on export-oriented sectors and contributing to equity market weakness.

The Bank of Japan maintained its accommodative stance and indicated willingness to expand stimulus if necessary. Investor sentiment remained cautious, with attention focused on global developments and currency fluctuations affecting corporate earnings outlooks.

Emerging Markets

Emerging markets experienced mixed but generally cautious performance in June as Brexit-related uncertainty temporarily reduced global risk appetite. Currency volatility increased in several economies, particularly those with strong trade linkages to Europe.

Commodity exporters remained sensitive to fluctuations in oil prices and global growth expectations, while India continued to show relative resilience. China remained stable due to continued policy support, helping to prevent broader contagion across the region.

Commodities

Commodity markets were volatile in June, with oil prices initially rising on expectations of tighter supply conditions before falling again as global growth concerns intensified following the Brexit referendum.

Gold strengthened as investors sought safe-haven assets amid heightened uncertainty. Industrial metals were mixed, reflecting uneven demand expectations, particularly from China, while agricultural commodities remained largely stable with modest volatility driven by weather and supply factors.