Important Links
EU Referendum Updates From Citi Analysts - Citi UK

EU Referendum Updates


Published 11 July 2016

At the Citi Mid-Year Outlook Event on 5th July, we were excited to host a panel of industry experts from our partners at M&G, Pioneer and Columbia Threadneedle Investments. The debate in front of an audience of Citigold and Citigold Private Clients covered a range of topics such as the slowdown in China, and the forthcoming US Presidential elections.

The primary focus of the panel and audience was the recent EU Referendum update and how they expected the financial markets to adjust. Each of the panel highlighted the importance of diversification of assets, while managing expectations of returns, in a remit of subdued global growth.

Deepak Kumar, a Portfolio Counsellor with Citi UK, presented Citi’s Outlook. To see a summary of Deepak’s presentation please watch the video above. If you are an existing Citigold or Citigold Private Client and wish to receive the full Outlook in writing, please contact your Relationship Manager who will gladly provide.

Interestingly, one area the panel disagreed over the benefits or the potential of central bankers using “Helicopter Money” as an alternative to quantitative easing, by directly giving money to the population to stimulate economic growth.

As the panel debated the topics, the audience were able to participate by electronically voting for multiple choice answers. The interactive voting also enabled clients to submit questions to the panel. Please click here for our answers to the most frequent themes that were asked.

Investing for better returns

Have you planned ahead for your financial goals? Most people have a financial target in mind such as starting a new business, their children or grandchildren’s education, retirement planning or charitable giving. For many people savings alone would not be enough to achieve their financial goals, this video looks at the behavioral studies of investing and how to overcome common fears of investing.


Citi will present its mid-year Outlook on the global economy and markets. Plus, our expert panellists from M&G, Pioneer and Columbia Threadneedle Investments will be discussing and answering your questions on how the UK’s vote to leave the European Union will affect investment opportunities.

Citigold and Citigold Private Clients can register for the event by calling 0207 500 1992 (9AM to 5PM Monday – Friday).

Updated 27th June


Read the latest on Market Implications, Currency Forecast and World Market movements in this week’s edition of the Market Update

Updated 24th June

UK Public has voted ‘Leave’, what’s next?

Brexit: What are the Implications? Read the latest from the Citi Analysts in this update.

Updated 22nd June

A vote of public opinion

In the last few days ahead of the EU Referendum Update, the opinion polls will be important for financial markets and the probability they indicate of the UK leaving the EU. Media noise from public debates between the Remain and Leave camps could influence public opinion.

Remain or Leave?

Citi Analysts believe economics support the case for remain. A ‘Leave’ vote could potentially result in GDP growth halving to around 1% as exports, investment and consumption all weaken. Citi Analysts’ base case is for a Remain vote, with a 30-40% probability of leaving, which has recently been increased to the top end of the range.

Ahead of the EU Referendum Update, Citi Analysts expect investors to move into safe havens such as the US dollar and long dated treasuries, which have higher nominal yields than many markets world wide, where rates have fallen to modern day lows.

If there is a Remain vote, Citi Analysts expect a risk rally but some geo political risks remain such as the upcoming US elections. If there is a Leave vote, Citi Analysts expect the US Fed to be more dovish, whilst the ECB is likely to watch for signs of weaker confidence within the EU.

Read more about Citi Analysts views on:


Citi Analysts remain neutral on UK equities and slightly overweight European equities.

In a ‘Remain’ vote scenario both UK and European equities could be expected to rally. The recovery could be particularly pronounced given the speed and extent of the falls seen in the last fortnight as the polls have narrowed. Year-to-date, the Euro Stoxx 50 Index is down 13.3%, while the FTSE 100 index is down 4.3%. The FTSE 250 Index is more domestically-oriented and could bounce most from its 6.4% fall year-to-date. The sustainability of the rallies is likely to depend on the size of the ‘Remain’ win.

In a ‘Leave’ vote scenario much depends on the index levels at the time of the vote. In the UK, there would more likely be significant volatility given the probable Conservative party disarray at a time when the roadmap and timetable for EU exit would begin to be debated. In the medium-term, market direction would depend largely on how long the fall in economic growth lasted. That in turn would depend on the path taken to revive trade linkages, as well as on implementation challenges that cannot be accurately assessed at this stage. Given those uncertainties, it is hard to build a medium-term case for a strong and early UK economic recovery.

At a sector level, there are several areas of concern

  • Banks - a ‘Leave’ vote would result in uncertainty, which implies less lending and lower fee income. In addition, there would be asset quality and funding cost pressures
  • Housebuilders - falling volumes and prices driven by lower migration into the UK and less overseas demand from EU. In addition, softer wage growth and labour shortages would also likely impact on demand due to affordability constraints
  • UK property - although a weaker Pounds (GBP) would typically be supportive for overseas demand, the effect of this is expected to be relatively insignificant

Fixed Income

Citi Analysts remain overweight in corporate credit and underweight in sovereign bonds.

UK Gilts have been rallying as a pre-vote perceived ‘safe-haven’ as well as weaker economic activity. Gilts offer the attractions of having good liquidity and duration. A Leave vote presents downside risk to Gilt prices as Pounds (GBP) weakness could result in higher inflation and more focus on the twin deficits (UK public sector and balance of payments deficits). In addition, the Bank of England could be forced to maintain a tighter monetary policy than otherwise if the UK votes to leave

Despite the strength in the European investment grade corporate bond market so far this year, with average yields down to 1%, there is further to go particularly for corporate bonds eligible for ECB purchase. As the investment-grade supply shrinks, there is likely to be positive spill-over impact into high-yield bonds. Citi Analysts prefer investment grade, which tends to outperform high yield in a falling yield environment. The caveat to this overall positive corporate bond outlook would be a UK ‘Leave’ vote, which could potentially lead to short-term price weakness ahead of further ECB buying.

European sovereign yields could decline further in the short-term. However, Citi Analysts believe they do not offer good value. The 10-year German Bund yield has now gone negative for the first time ever and a total of $2.8 trillion Euro-region sovereign debt is now trading below zero.


As referendum uncertainty mounts, one-month Pounds (GBP) volatility is trading near all-time highs, surpassing the levels hit during the worst of the financial crisis in 2008. Pounds (GBP) remains near two-month lows. Most activity ahead of the vote is likely to remain primarily in hedging the outcome-risk, with some investors also taking directional views on the EU referendum update.

In a ‘Remain’ vote scenario, Citi Analysts expect a rally back towards the US$1.50 level. The Euro is expected to move sharply higher alongside the British pound in the short-term, given that the outcome would remove a large degree of negative political uncertainty. But in the medium-term, we would expect downward pressure given the ongoing loose monetary policy by the ECB.

In a ‘Leave’ vote scenario, Citi Analysts expect a potential 10%-20% fall in Pounds (GBP), liquidity is expected to remain constrained in the days leading to and immediately after the vote.


The EU Referendum update is not legally binding on the UK government. A close Remain or Leave could start a new narrative, a compromise instead of an exit or a new referendum. The investor uncertainty is already weighing on Pounds (GBP). But there will be opportunities to trade the noise in anticipation of the more probable remain outcome.

Are you a Citigold Client or Citigold Private Client?

Contact Your Relationship Manager

Speak to your dedicated Relationship Manager about the options available to you. For contact details, visit Citi Online and select My Profile – Relationship Manager Team menu option