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04/12/2016

Sleepless in the City: London traders brace for referendum

UK & Europe

Sleepless in the City: London traders brace for referendum

Widely lampooned in London, the Gherkin building (letf), completed in 2003, is considered a symbol of the City's financial clout, now threatened by Brexit.

[Shutterstock]

London’s financial district is set for a sleepless night Thursday (23 June) as traders hunker down to await the hotly-anticipated EU referendum result.

Global stock markets rallied Monday as investors cheered polls suggesting Britons may choose to stay in the European Union in the crunch vote.

But with three days to go, the Remain camp is still neck-and-neck with the “Leave” campaign in the main polling average, despite modest gains.

With all the world’s eyes on London, the British capital financial hub — known as the Square Mile — is preparing for an anxious night shift.

The official result is not expected until the early hours on Friday (24 June) but some hedge funds and banks have reportedly commissioned private exit polls, which could make the value of the pound the key index to watch on referendum night as traders move money based on the results.

Remain camp gains momentum in first Brexit poll since Jo Cox murder

The pound extended its rally in Asian trade Monday (20 June) as investors swung their bets to Britain voting to stay in the European Union this week and latest polls showed support shifting to the Remain camp after the murder of a pro-EU lawmaker.

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‘Hopping in and out of office’

Alan Clarke, head of European fixed income strategy at Scotiabank, is among those who have made special sleeping arrangements for Thursday.

“I am going to be staying in a hotel very near the office and hopping in and out of the office through the night depending on how things are going,” Clarke told AFP.

“It is a balancing act — being on top of the issues/outcome working in the early hours, versus being top of your game on the Friday when the result is clearer. I’m hoping to find the middle-ground,” said Clarke, who lives in Cambridge.

A Brexit would likely spark a slump in the pound and with “contagion effects” hitting markets worldwide, the International Monetary Fund has warned.

The country’s possible withdrawal from the 28-nation bloc has stoked fears of a blow to the economy of both Britain and the EU, with ripple effects throughout a weak global economy.

At Dutch lender Rabobank, the foreign exchange trading division will remain up and running throughout Thursday night and into Friday.

Some Rabobank staffers may also stay in hotels on Thursday to allow for an early start.

“In addition to our regular Hong Kong team, the foreign exchange trading desk will be staffed all night in London,” said senior currency strategist Jane Foley.

“E-commerce will also be working all night to ensure a smooth running of our electronic platform.”

Other major banks, including Barclays, HSBC, Morgan Stanley and BNY Mellon, have also confirmed plans to boost staffing levels to monitor any volatile market moves and advise clients.

The referendum outcome is seen all the more uncertain after most pollsters failed to predict a win for British Prime Minister David Cameron’s Conservative in last year’s general election.

“If we have learnt anything from recent elections, it’s that opinion polls are not gospel and may well shift over the coming days again, driving yet more volatility,” said Joe Rundle, head of trading at ETX Capital.

Global markets on edge as Brexit vote draws near

Investors from the Americas to Asia have been fleeing for the exit over the past week, as a succession of opinion polls put the Leave camp in front, ahead of a 23 June referendum on whether Britain should remain in the European Union.

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Mopping up a bloodbath?

The Spreadex trading firm has decided to double the number of London traders on Thursday night.

“In either eventuality — be it Brexit or no Brexit — the traders are expected to be very busy,” Spreadex analyst Connor Campbell told AFP.

“If Britain chooses to leave the EU the immediate market ramifications are clear, and Spreadex will require all hands on deck to mop up the bloodbath.

“If the country opts to remain in the EU, on the other hand, an influx of fresh traders, and the return of those who had sat out the run-up, will still mean the desk will be busier than usual.”

But Adam Jepsen, founder of trading firm Financial Spreads, recommended a more laid-back approach to the referendum result.

“A simple solution is to sit on your hands,” he wrote in a note to clients.

“Just watch Euro 2016, take up a hobby, learn how to play Minecraft, take care of that errand you have been putting off for two months or finish the DIY you’ve been putting off for two years.

“There will be plenty of trading opportunities after the result has been announced and the markets have had a little time to calm down.”

Brexit: Paris stock exchange to ‘assert its strength’

The Paris stock exchange plans to “assert its strength” to attract international businesses, taking advantage of the potential damage Brexit could do to the City of London, French sources said on Monday (30 May).

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Background

Timeline

  • 23 June: Referendum on Britain's continued membership of the European Union
  • 28-29 June: EU summit in Brussels