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Markets rise as Brexit fears subside

Source: The BRICS Post

Fears of a ‘Brexit’ – or Britain voting in Thursday’s referendum to leave the European Union – appear to have subsided in recent days as Asian markets get a leg up following polls in the UK which indicated that most would vote to stay in the organization.

Japan’s Nikkei closed up 1.28 per cent at 16,169.11, reversing earlier losses, while South Korea’s Kospi index was up slightly at 1,982.70. Hong Kong’s Hang Seng Index was up 0.77 per cent at 20,668.44 but the benchmark Shanghai Composite close down 0.35 per cent at 2,878.557.

Global investors had earlier taken a cautionary stance ahead of the June 23 EU Referendum vote in Britain and also seemed jittery that US Federal Reserve chief Janet Yellen could hint at the next rate hike when she addresses members of Congress on the state of health of the US economy.

Last week, the Federal Open Market Committee (FOMC) indicated following its two-day meeting in Washington that it would not hike interest rates at this time.

Instead, it voiced confidence that interest rates will likely gradually rise but maintained an accommodative stance.

The decision does not come as a surprise following recent data showing a subdued US economy late last and early this year.

At a press conference shortly after the FOMC statements were made public, Yellen admitted that recent economic data had been a mixed bag “suggesting our cautious approach to adjusting monetary policy remains appropriate”.

Remain vote winning?

The Brexit campaign had paused over the weekend after the murder of Labour MP Jo Cox; when it resumed on Sunday, two new polls showed that the vote to stay in the EU had gained ground.

Voting to remain in the EU would be positive news for Asian economies when one considers the alternative.

A study conducted by the London-based National Institute of Economic and Social Research, estimated that Brexit could decrease British global imports by 25 per cent worldwide over the next two years.

This would directly impact countries like China, who are yet commodity-export driven economies, but some analysts ay this would only be to the measure of -0.2 per cent on Asian GDP.

Tuesday’s largely Asian rally appears to follow on the heel’s of Monday’s emerging markets boost.

On Monday, most Latin American markets and currencies closed higher on fading fears of a Brexit.

US markets also saw an uptick: The Nasdaq Composite closed up 0.77 per cent at 4,837 while the Dow Jones Industrial Average closed up 0.73 per cent at 17,804.87.

The S&P 500 closed up 0.58 per cent at 2,083.25.