After another dismal trading session in the wake of the Brexit vote markets stormed a reversal and posted a strong gains on the week, including London’s FTSE which had its best week in years. Despite the risk-on attitude it was defensive sectors (Utilities and Telecoms) that led the week while bonds around the world also gained.
Bank of England Governor Mark Carney advocated a rate cut for the economy in light of last week’s referendum. Carney had strongly advocated that the U.K. remain in the E.U. for the sake of the country’s economic well being. Concurrently, analysts and traders are increasingly expecting more monetary action from the ECB soon, possibly in the form of an expanded QE program.
Oil posted its highest quarterly gain since 2009. Crude rallied 29% over the past three months. Supply data from the EIA this week showed a substantially larger withdrawal than initially forecasted. The weaker dollar has also helped to buoy oil and other commodities.
Congress formally agreed to, and President Obama signed, legislation to put Puerto Rico’s finances under a federal oversight board. Governor Padilla declared a moratorium on debt payments minutes later. While the legislation doesn’t stop the default of nearly $2 billion in payments, it does prevent bondholders from filing lawsuits against the country.
Eurozone manufacturing activity increased for several countries last month. Germany’s sector posted a 28 month high while Spain and Italy also posted stronger than expected figures.
All U.S. banks passed the Federal Reserve’s stress tests and had their capital plans approved. Only the U.S. units of Deutsche Bank and Santander failed to pass the tests, designed to see how the largest banks would perform in dire economic circumstances.