US Bank Stocks Expect Beating After Brexit Vote - from TRUNEWS

Investors are wary ahead of the key vote Thursday over whether Britain quits the European Union. Should the anti-EU forces win, U.S. bank stocks could get slammed. Analysts say a British exit would weaken activity in the capital markets. Keefe, Bruyette and Woods says that would most hurt JPMorgan Chase, whose CEO has threatened massive layoffs in the UK, and Goldman Sachs, which gets nearly a fifth of its revenue from its British operations.

A Brexit supporter holds a Union Flag at a Vote Leave rally in London, Britain June 4, 2016. REUTERS/Neil Hall

Wells Fargo Funds Management’s John Manley:

“I think the U.S. has used London as a springboard to cover the Continent. That’s not going to work. That means more expense.”

An exit from the EU could also trigger a spike in the dollar against European currencies.

Recon Capital Partners’ Kevin Kelly:

“One of the biggest consequences that could affect the U.S. economy over here is the dollar would get significantly stronger against the pound, and that is the least that the multinational corporations want to deal with.”

So Kelly says U.S. large cap stocks could be vulnerable.

But some stock watchers say investors shoudn’t make any moves ahead of the referendum.

Jeff Layman of BKD Wealth Advisors:

“I think at this point, it doesn’t make sense to exit stocks. There’s still a pretty fair chance that Britain remains.”

If that happens, strategists say, expect a relief rally.

Global markets turned cautious on Wednesday, a day before the United Kingdom votes on whether to stay in the EU, with Wall Street stocks trading sideways, sterling giving up gains and government bonds edging higher.

Oil shed more than $1 to fall back below $50 per barrel and the yen was down against the dollar, with the latest polls showing a slight tilt toward leaving the European Union when Britons go to the polls on Thursday.

The “Leave” campaign holds a 1-2 point lead over the “In” camp ahead of Thursday’s membership referendum, according to surveys published by polling firms Opinium and TNS, reversing a tilt earlier this week toward “Remain”.

“I think the result of the Brexit vote is 50/50, and it will probably be very tight,” said Olivier de Berranger, fund manager at French firm La Financiere de L’Echiquier, which manages around $9 billion in assets.

Sterling rose around 0.1 percent against the dollar, below $1.47 and edging away from Tuesday’s 5-1/2 month high of $1.4781. The pound has risen 5 percent since dropping to a three-month low of $1.4010 last Thursday.

Britain’s main share index hit a two-week high on the eve of Thursday’s vote on EU membership before surrendering half the day’s gains in the last minutes of trading.

The Dow Jones industrial average fell 0.24 percent, giving up morning gains. The MSCI’s all-country world stock index edged up 0.14 percent but has still gained 2.2 percent so far this week.

Putting a floor under markets, betting patterns with bookmakers have shown a re-opening of the gap in favor of “Remain” after the murder last week of a pro-EU lawmaker appeared to derail the “Leave” campaign.

Europe’s stock markets also pared gains into the close. Europe’s FTSEuroFirst index of 300 leading shares was up 0.5 percent, Germany’s DAX was up 0.6 percent, France’s CAC 40 up 0.3 percent and Britain’s FTSE 100 up 0.6 percent.

The yen slipped 0.3 percent against the dollar to 104.41 yen, and the euro rose 0.5 percent to $1.1301.

For the latest Reuters news on the referendum including full multimedia coverage, click.

Fed chief Janet Yellen said on Tuesday the risk of Brexit was something that needed watching “very carefully”, but she added that the central bank’s ability to raise interest rates this year may hinge on a rebound in hiring.

Yellen concluded her testimony in front of the U.S. House Financial Services Committee on Wednesday, with little further indication about the central bank’s thinking on the U.S. economy and the timing of interest rate hikes.

Benchmark 10-year U.S. bond edged lower, yielding 1.68 percent. Germany’s 10-year yield edged up a basis point to 0.06 percent.

Gold cut some of its earlier losses after the polls but edged lower into the afternoon. Spot gold fell 0.2 percent to a near-two-week low of $1,265.60 an ounce.

Brent crude futures fell 2.7 percent to $49.27 per barrel. The new benchmark August contract for U.S. crude futures fell 2.7 percent to $48.49.

(Additional reporting by William Schomberg, editing by Larry King and Nick Zieminski)

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