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S&P reports UK volatility soaring


UK volatility is now at by far its highest in Q2 2016, with the S&P UK Volatility Index (1-month realized) nearing 24 according to data analysis by Tim Edwards, Senior Director, Index Investment Strategy, S&P Dow Jones Indices. 

S&P’s key findings are that historically volatility tends to rise far more quickly than it falls, and given the general record of the EU in solving difficult negotiations, volatile markets may be here for some time. Edwards writes that dispersion is also rising – and rising far more quickly among sectors than countries.
“Despite the seeming importance of national distinctions to current events, so far it has mattered less whether stocks are based in the core, periphery or edge of Europe.  Wherever they are based, European financials face the potential for material disruption from Brexit, while energy companies and consumer staples have so far been largely untroubled.
“Given the general sentiment, it is notable that the UK’s equity market is not far at all from where it was only three months ago, at least, in pound sterling terms.  One reason that the market has held up so well is due to the fall in the value of the British pound: for the large multinationals that make up a significant proportion of the local exchange, a cheaper pound inflates the relative value of their considerable foreign revenues”.

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