Much to the surprise of market participants, equities have recovered most of the losses they experienced in the wake of the Brexit vote. It seems the market came to the very quick realisation that the UK’s exit from the EU will take a long time and so things will remain the same from an economic point of view for now.
Multinationals listed on European and UK exchanges look more valuable in local currency terms.  Sterling and the Euro have weakened and the equity markets have rallied to offset the large currency falls.
Equity markets outside of Europe – such as Australia, Japan and the US – also responded well to Brexit. Much of this can be attributed to the fact that central banks will likely loosen monetary policy in response to the UK exit.
Japan has taken the brunt of the hit to currency, strengthening significantly against the US dollar. Markets are now waiting to see if the Bank of Japan intervenes with the currency or increases quantitative easing.
As news of Brexit begins to calm, markets will shift focus to the US employment. A strong employment report and wage growth could cause a quick shift in expectations to a rate hike sooner than expected.  This may upset the positive mood currently supporting US equity markets.
In Australia, the focus is on the result – or rather lack of result – from the weekend’s federal election. It appears the most likely outcome is a hung parliament although we may have to wait some time until we know for certain.
Uncertainty is never good for markets; however, the Australian economy remains strong. We expect international money flows into our market will slow until the election outcome is known.
The Reserve Bank met on Tuesday and held rates steady. We are also expecting a pickup in retail sales in coming months, reflecting a sustained rebound in consumer confidence following the RBA's decision to cut interest rates in May.