Market sentiment dominated by the looming Brexit referendum - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that the market sentiment continues to be dominated by the looming Brexit referendum tomorrow.

Key Quotes

“Bloomberg Odds-checker still has Bremain at 79.4%, although Bing Predicts has it at 57.6%, and the balance of opinion polls have it on a knife’s edge, with how remaining undecided voters break likely to be key to the outcome.

Draghi, stated that the ECB is ready to respond to any potential Brexit turmoil. However, there was lots of implied turmoil of a different kind in his answers on another topic, negative interest rates, which have been the subject of withering criticism from many sources of late. Here he displayed classic central banker “Never mind the quality, feel the width” logic, noting that “One way of looking at it is that increasing lending volumes might compensate” for negative rates.

Of course, another way of looking at it is that if you don’t make any money lending at negative rates then lending more the same way actually makes matters worse. Equally, if lending at negative rates distorts asset markets and leans against much-needed structural reforms, then doing more of it is not the most useful of outcomes. Can the ECB absorb that message? Perhaps (perhaps, perhaps). More positively for the ECB Chief, however, Germany’s constitutional court did not stand in the way of his OMT plans in its legal ruling.”