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Homebuilders, banks under pressure
Asian traders bought US dollar against the majors, and yen against the US dollar. The USDJPY continued seeing resistance pre-103 mark in Tokyo. The month and quarter-end inflows kept the yen in demand; nevertheless the pair is gaining potential for a surge towards the 105 mark on softer Federal Reserve (Fed) expectations and speculations of further monetary stimulus from the Bank of Japan (BoJ).

The FTSE 100 opened in the red after having outperformed its European peers by a decent 3.58% rally yesterday. The UK banks are paring gains in London: Lloyds (-1.60%), Barclays (-1.49%), RBS (-3.44%). Banks and financials will certainly be facing major challenges in the period ahead. Rising speculation of potential flights out of the City of London are whistled in the wind.

Property market and homebuilders are also subject to fresh selling pressures amid news that Singapore's UOB suspended its loan programme for London properties due to Brexit risks and uncertainties. Taylor Wimpey (-2,41%), Persimmon (-1.73%), Baratt Developments (-2.25%).

We reiterate that volatility is a sign of stress on both sides. Despite short-term rallies, UK equities are expected to remain downbeat due to a combination of reasons; credit downgrades from Moody’s, S&P and Fitch, uncertainties regarding the UK’s future in Europe, and also the complex political situation within the United Kingdom as a whole. In a recent report, JPMorgan said to consider the Scottish independence and a new Scottish currency as a ‘base case scenario’.

Today, PM Cameron will hold an emergency meeting with leading business leaders in an effort to restore confidence following the Brexit vote. Leaders will discuss how to get the best possible deal from the European Union, how to secure the best free market access and how to get alternative trade deals across the globe. In this respect, the UK prepares to put in place a dedicated commission to take part in trade negotiations. Business leaders will also be demanding new fiscal measures to support and boost business in the UK. Hence, reduction in corporate taxes will likely be on the menu of the day.

Last but not least, the Bank of England Governor, Mark Carney, also decided to step in the scene, hoping to temper the turbulence caused by the Brexit vote. Carney will certainly announce the contingency plans to reassure liquidity and to smoothen activity in finance.

The sterling recovered 3% off the post-Brexit bottom against the US dollar, 2% against the euro. Nevertheless, a combination of loose monetary and fiscal policies could dent appetite on the buy side. The sterling market remains heavily loaded with put options. Option barriers are solid from 1.35 to 1.38 against the US dollar, call options abound at 0.80 against the euro at today’s expiry.