Developments in the international financial
markets in the second quarter were dominated
by uncertainty surrounding the British referen-
dum on whether to remain in or leave the EU.
Another important factor was monetary policy
in the industrialised nations which maintained
an expansionary stance – not least because of
the UK Leave vote and concerns about the
downside risks for the global economy that it
A lot of market participants were
surprised by the vote and shifted funds into
safe investments (safe haven inflows). None-
theless, the turmoil that observers had feared
such an outcome would cause on the inter-
national financial markets failed to materialise.
Long- term government bond yields in the
major currency areas continued to decline and
temporarily reached historic lows. This was the
case in Germany, Japan and the UK, for in-
stance. Mirroring this, the stock markets ini-
tially also recorded sharp share price losses in
response to the outcome of the referendum.
However, as uncertainty eased, a counterswing
fairly rapidly set in on the bond and, especially,
the stock markets. Overall, the Euro Stoxx was
trading slightly above its level at the end of
March as this report went to press, and the US
markets even marked new record highs.
European bank shares signifcantly underperformed
the market. They suffered from deteriorating
earnings expectations and the fact that atten-
tion was increasingly focusing on the large
levels of non-performing loans, especially in
Funding conditions for enterprises in the
euro area improved considerably. The euro’s
effective exchange rates against the currencies
of 19 major trading partners remained virtually
unchanged as compared to the end of March.
While the single currency fell perceptibly
against the yen, it appreciated strongly, espe-
cially against the pound sterling.