Market Drivers June 13, 2016

Chinese data comes in line
Risk aversion flow dominate
Nikkei -3.51% Dax -1.52%
Oil $48/bbl
Gold $1286/oz.

Europe and Asia:
CNY Industrial Production 6.0% vs. 6.1%
CNY Fixed Asset Investment 9.6% vs. 10.5%
CNY Retail Sales 10.0% vs. 10.1%

North America:
No data today

Risk aversion flows dominated the opening hours of trade on a brand new week in FX with USD/JPY testing the key 106.00 level in both Asian and early morning European trade.

USD/JPY slipped to a low of 105.73, rebounded and then resumed its downward trek as equity indices continued to fall in both Asia and Europe. The Nikkei finished down more than -3.5% while the DAX was lower by -1.5% as worries about Brexit and weak Chinese data weighed on investors minds.

As Brexit nears the prospect of a Leave vote has global markets on edge, not only because of the unknown impact on the UK economy, but also because it would present the first formal challenge to the current global economic order and could spark a much wider and more dangerous fracture of the European union. With Leave vote seemingly picking up momentum by the day, investors are starting to fear that what was once simply a quixotic exercise in self determination could turn into an avalanche of uncertainty that would pummel global capital markets.

Meanwhile on the economic front the data from China was hardly uplifting with Industrial Production rising 6.0% versus 6.1% eyed while Fixed Asset investment fell to 9.6% from 10.5% forecast. The news out of China shows that any pickup in activity remains illusory and several analysts have started to forecast that PBOC will have to cut rates further in order to stimulate policy.

The one two punch combination of Brexit and China slowdown remains the key economic risk to global markets for now. With no data on the US calendar today, trading is likely to be dominated by flows from the other side of the Atlantic and a new Brexit poll by ICY due to be released at 1230 London time could only roil the markets further with USDJPY looking to test the yearly lows at 105.50

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