Some thoughts on today’s dramatic global “risk on” stock ramp from Mark Cudmore, a former FX trader who writes for Bloomberg

The Definition of Respite

Today’s Brexit sentiment-related rally seen across global financial assets will soon dissipate. Far from being a turning point, the next few days will be dominated by fear and risk aversion.

Respite is “a short period of rest or relief from something difficult or unpleasant” according to the Oxford English Dictionary. That almost perfectly wraps up the view across global markets going into the European session.

The latest poll put the Remain vote ahead after last week showing Leave with the higher count. Bookies’ odds of Brexit have also lengthened sharply. Whatever your view on the reliability of pre-referendum surveys, the important point is that the outcome remains uncertain even if it seems unlikely that Britain will leave the EU.

The referendum is the single biggest risk-event in 2016. No major money manager can afford the consequences of being wrong if they significantly increase their risk exposure this week.

The bravest and most nimble can perhaps punt on sentiment moves. But that is only day-traders and the most opportunistic of hedge funds, and they are a minority of money flows.

For the next few days, the stronger players will either be sitting on their hands or increasing their Brexit hedges.

Given the lack of liquidity in the market and reduced risk appetite, any major hedging flows will impact markets significantly. This will only add to nervousness and increase hedging pressures further yet again.

Markets will remain sensitive to all headlines and developments either for or against departure. But the relief rally will soon fade and, globally, most risky assets will trade weaker by Thursday.