Global stocks have instigated a relief rally in the aftermath of the strong selloff that followed the shock outcome of the British referendum on the country’s membership of the European Union.
The referendum, held last Thursday, saw Britons vote by a slim but decisive margin to end their country’s 43-year membership of the 28 nation-strong trading bloc. The result caused a huge selloff in global stocks with major indices losing more than 3% of their value as it raised profound doubts about the EU’s future in its current form. Japan’s Nikkei 225 shed close to 8% of its value.
The British Pound slumped to levels not seen since the 2008 financial crisis, at one point trading at a little over $1.32 with the US dollar. It pared losses but proceeded to plumb new depths when markets opened again this week.
Tuesday’s session saw the pound recover from $1.31 to $1.33 while the FTSE 100, the country’s benchmark stock index, surged 2.5% as investors bet the selloff had been overdone.
"We think this is a relief rally with many investors covering their shorts and we expect a resumption of the downside momentum during what remains of this week," said Nick Cavendish, chief economist at Monex Financial.
“The reception to the news across the world has been negative with many investors in the US and Asia suggesting that Britain’s exit from the EU will have far-reaching and long-lasting ramifications for the global economy,” Cavendish added.
Monex Financial Has told clients to focus on temporary defensive plays including the acquisition of gold and German bunds but advised them to keep an eye on markets for the inevitable bargains that could become available as the fallout from the referendum’s outcome continued in the coming days.

About Monex Financial
Monex Financial is a privately held, fully independent investment and wealth management leader, with retail operations based in Toronto, Canada and corporate trading division headquartered in Tokyo, Japan.

From our offices in Toronto the capital city of the province of Ontario and financial and business capital of Canada, we serve private individuals and families from N. America to Europe and with our corporate trading division strategically located in Tokyo, Japan, we have unrivalled access to Asia’s high yielding emerging markets, access to corporate resources, private equity and global mergers and acquisitions.