Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.


One month on and European Equity investors could be forgiven for thinking the UK Referendum never happened; the market has displayed an impressive amount of equanimity regaining nearly all lost performance. Looking forward, should investors expect ongoing market composure or is a period of consolidation due?

MSCI Europe Before & After Brexit

Source: Bloomberg as at 4 August 2016.
Source: Bloomberg as at 4 August 2016.
Franzin Diego
Franzin Diego

Further Central Bank Easing Will Be Supportive But Not A Catalyst

The primary driver of greater risk appetite has been investors’ belief that central banks will release further stimulus in an attempt to offset the negative effects of Brexit. We are more sceptical than the market regarding the efficacy of Quantitative Easing (QE) on equity markets, believing that the impact will be more diluted than in previous years. It is clear that QE is important in terms of providing a supportive floor for the market. On the other hand, it’s more difficult to present further monetary stimulus alone as a compelling argument for the market to move sustainably higher in the face of ongoing political and economic uncertainty.

Optically Pleasing Q2 Results A Non-Event

Although good on paper – Q2 earnings this year are a non-event. As most of the period in question was prior to the Referendum, these releases clearly have an inability to provide an indication of any post-Brexit deterioration. Our view is that Brexit will be a clear negative for growth across Europe. The as-yet-unknown impact on economic activity encourages us to look towards Q3 earnings releases as a better indicator for investors.

Technicals at Play – Range-Bound Market Likely To Continue

Technicals rather than fundamentals have been driving the market over the last month, with the prospect of further liquidity allowing the market to move higher. On a more positive note, the market no longer expects earnings growth suggesting any resilience in Q3 numbers will be well-received. Taking everything into consideration, we retain our view that the market will remain range-bound over the remainder of 2016 until more clarity on the political and economic landscape is available. In this environment, we believe that a focus on alpha generation through quality stock selection will be a principal driver of returns.