Market Overview: Stock markets opened sharply lower this morning while interest rates dove and gold and silver rose. The highly anticipated Brexit vote has now come and gone, and the results were not what markets had been expecting over the last few days. Great Britain voted to exit the European Union in a historic move that could have far-reaching effects. While investors had been concerned about such a result, it seemed that the “remain” camp was ahead going into the vote. Once the votes started rolling in, however, it became apparent that the vote would be very close. In the end, the “exit” camp took the vote. Following the results, the pound was sold-off in dramatic fashion and stock index futures tumbled.
Key Data Points: The latest reading on Durable Goods Orders was released this morning and showed new orders were down a significant 2.2 percent. The weakness in orders will likely be a drag on overall GDP, which is weak to begin with.
The latest reading on Consumer Sentiment was also released and showed a healthy reading of 93.5 even as the Brexit vote was approaching.
Outside Markets: Stocks are getting hit hard today, although are well off their session lows. The broad market S&P 500 is currently down almost 2.5 percent, while the Dow Jones is down almost 2.3 percent as of this writing. Equity investors are running for the exit signs as the uncertainty surrounding the potential implications of a Brexit weigh on risk appetite.
The British Pound is significantly lower, trading down over eight percent against the dollar. The euro is getting pounded this morning, as well, as investors seek the relative safety of the U.S. Dollar and the Japanese Yen. The dollar index is up over two percent this morning, although the dollar strength is not enough to derail buying being seen in gold today.
Crude oil also experienced heavy selling and is down over four percent this morning.
The Big Picture: Gold is up over $50 per ounce as of this writing, while silver is up over $.40 per ounce. The Brexit vote carries with it a significant amount of uncertainties, and investors are seeking refuge today in perceived safe havens such as gold, treasuries and the dollar. It may be some time before the dust settles following this vote, and risk assets could potentially remain under significant pressure. The effects of Brexit could be quite expansive, and may be felt by countries and economies around the globe. This vote could even potentially influence the Fed to keep rates at current levels longer than expected, and gold could possibly stand to benefit. If stocks continue to decline, gold may see ongoing inflows as investors seek out alternatives.
