The global rally that started last week was mainly fed by stimulus hopes. After Britain decided to exit the European Union (EU) in the referendum that was held on Thursday 23 June 2016, global financial markets weakened sharply. However, this weakening was followed by the five-day rally last week after various central banks around the globe (including the Bank of England, Bank of Japan and European Central Bank) indicated that they could and would provide additional stimulus in order to prevent the Brexit-issue from having a severe negative impact on financial markets.

Meanwhile, concerns about another interest rate hike in the USA faded drastically as few believe that the US Federal Reserve has room for monetary tightening given the ongoing concerns about the Brexit-issue. A rate cut may in fact be more likely than another rate hike in the USA. A US interest rate hike would imply significant capital outflows from the higher-yielding yet riskier Asian assets, while (expectation) of a rate cut would imply additional inflows into Asian markets.

US government bond yields slumped this week with the yield on the 10-year US Treasury note touching fresh lows on Tuesday as investors are in search of safe havens as well as being in anticipation of further central bank easing.

Last week's rally was also fed by fading concerns that the exit of Britain from the EU will have a major negative impact on the global economy. Most analysts seems to agree that the Brexit has far-reaching consequences for Britain (perhaps even causing a recession) but not so much for its trading partners or the global economy.

The British pound fell again to a three-decade low against the US dollar on Tuesday at GBP 1,3184 per US dollar as the Bank of England expects declining inflows in the foreseeable future. Meanwhile, real estate shares in Britain are plagued by Standard Life Investments' decision to suspended trading in a UK commercial real-estate fund after Britain voted to exit the EU.

Negative sentiments also originate from Italy where the world's oldest lender, Banca Monte dei Paschi di Seina, received a warning from the ECB regarding the bank's high level of bad debt. This caused concerns about the whole banking sector of Italy (in late July results of a stress tests are expected to be published by the ECB).