Two Reasons Why the Markets Are Recovering

29.06.2016 • Emerging Markets

From Daily Pro (Brazil)-

Apparently – and this is an important caveat – we digest the Brexit. At least that is the signal emitted by the markets this morning. If there are ruminations ahead, we do not know. The future insists on being ambiguous to me. Maybe there is problem with my crystal ball. The market suffers from reflux and esophagitis is not ruled out in the coming days. But only the present exists. And it is favorable.

After a pronounced jump in risk aversion in the last two days and the further destruction of value of all history (were $ 3.1 trillion), markets recover. Two forces push toward assuming more risk: i) the perception that the penalty was exaggerated before effectively material effects of Brexit, allowing some hunting bargains; and ii) the interpretation that the central banks can implement new monetary incentives, in particular the Bank of Japan, Bank of England and eventually ECB – the Fed, in turn, would delay US interest rise process; and this is already great, especially for the flow to emerging markets.

Gains are widespread in risk markets and the pound begins to rise after flirting with the historical minimum. Stocks in Europe rise more than 2% and Wall Street further advance 1%. In sizing the external behavior, Ibovespa Futuro rises 1.2%. Dollar falls 1% against the real.

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