Tuesday, 12 July: This morning BoE governor Mark Carney faced MPs following the bank’s warning of emerging Brexit risks and the release of the latest MPC minutes. Carney addressed underlying allegations that the BoE perhaps gave dishonest forecasts about a post Brexit Britain, which of course were dismissed. The Governor also stressed that credit should be made available for both households and businesses in the right circumstances. The minutes that were released shortly before Mark Carney spoke showed a unanimous decision from the committee regarding the decision to cut capital requirements for the banks. Speculation continues to surround a rate cut from the BoE, which could come as soon as Thursday although it’s very unlikely, with many investors siding with the view a rate cut is far more likely for August.
Further away from home an arbitration court ruling was declared today which has determined China has no historical ties to large waters in the South China Sea. The decision is seen as a victory for the Philippines, yet even in the face of the ruling China continues to not acknowledge it, very much a case of ‘what are you going to do about it?’ China has made it clear they will continue to defend their sovereignty and marine interests.
Back to markets, Japanese shares closed strongly again, building on yesterday’s rise of 3.98% to finish Tuesday 2.83% higher. A fiscal package is widely anticipated, as they also speculate Japan will issue new debt for the first time in 4 years.
Most of Europe followed suit from another strong session in Asia, as most of the main indices spent the day in positive territory. The UK lagged Germany and France with the 250 finishing up 0.6%. The FTSE 100 in comparison spent most of the day around flat, back and forth throughout the day until eventually settling at 0.03% lower. At the top of the FTSE sat IAG, the airline’s shares closing over 5% higher, ASOS listed on the AIM also saw shares jump over 4% after being confident of strong sales for the year. During the afternoon the American opening bells rang and shortly after we had the S&P 500 hit record intraday highs, the Dow hit a record high and the NASDAQ turn positive for 2016. The sentiment for risk on has derived from easing political backdrops in Japan and the UK as well as generally further strong data releases.