While you were sleeping: Stocks, pound rally as UK votes

Friday 24th June 2016

Equities on both sides of the Atlantic rose as investors awaited the outcome of a British referendum about the UK’s membership in the European Union, as recent surveys suggested more voters favoured the “Remain” option.

Polls will close at 10pm London time, and the first results are expected at about midnight.

There are no exit polls. However, YouGov, a pollster which successfully predicted the outcome of the 2014 Scottish independence referendum, will publish a poll of how people have voted shortly after polling stations close, according to Reuters.

Wall Street advanced. In 3.05pm New York trading, the Dow Jones Industrial Average climbed 0.95 percent, while the Nasdaq Composite Index rallied 1.18 percent. In 2.50pm trading, the Standard & Poor’s 500 Index rose 0.99 percent.

"Regardless of the outcome in the UK, we will see a relief rally in the US today and tomorrow," Mohannad Aama, managing director, Beam Capital Management in New York, told Reuters. "I think we'll continue to go up tomorrow even if a 'Leave' vote prevails because there's a lot of money in the sidelines ... and that will be routed to safer havens and that includes US stocks."

The Dow moved higher, led by gains in shares of Goldman Sachs and those of Visa, recently up 2.8 percent and 2.1 percent respectively.

Some say the gains are premature.

“I think the market jumped the gun,” Gennadiy Goldberg, an interest-rate strategist at TD Securities in New York, one of 23 primary dealers that trade with the Federal Reserve, told Bloomberg. “Today’s market move is what I would have expected from a ‘Remain’ win tomorrow.”

The British pound rallied, earlier rising above US$1.49 for the first time in 2016, even as it later pared some of those gains.

"The market is clearly now pricing in, with near certainty, a ‘Remain’ vote ... I do think a ‘Remain’ vote is more likely, but not with the degree of certainty that appears to be now priced," Adam Cole, head of G10 currency strategy at RBC Capital Markets, told Reuters.

Europe’s Stoxx 600 Index finished the session with an advance of 1.3 percent from the previous close. The UK’s FTSE 100 index added 1.2 percent, Germany’s DAX index gained 1.9 percent, while France’s CAC 40 index increased 2 percent.

Meanwhile, Tesco, Britain’s largest grocer, reported an increase in UK same-store sales for the second quarter in a row, a first in more than five years, and signalled its recovery is gaining momentum.

Tesco shares closed 0.8 percent higher in London.

“We have delivered a second quarter of positive like-for-like sales growth across all parts of the group in what remains a challenging market with sustained deflation,” Dave Lewis, Tesco’s chief executive, said in a statement. "I am confident that the improvements we are making for customers are working and will create long-term value for our shareholders.”

Some analysts were cautious.

“Tesco will be encouraged by delivering two consecutive quarters of like-for-like sales growth but the numbers are marginal, reflecting how difficult the competitive trading environment is for mainstream retailers,” Jon Copestake, an analyst at the Economist Intelligence Unit, told Bloomberg.

In other retail news, shares of Macy's gained, up 1.8 percent in 3.28pm New York trading, after Terry Lundgren said he would step down as CEO next year, and Jeff Gennette, currently president, will take over.

BusinessDesk.co.nz

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