Early morning (IST) Jun 24th UK votes to leave European Union
source telegraph.co.uk
World Market Reactions
Note FTSE outperformed because pound fall is expected to be good for the economy (export oriented services)
NIKKEI underperformed the most since Britain’s vote to leave the European Union prompted investors to flee global markets and seek safety in Japanese government bonds.The currency came within 6 yen of erasing the impact of more than three years of central-bank stimulus, piling pressure on policy makers to slow the advance. At its peak Friday, the yen was almost 7 percent stronger. The yen rally will render its exports less competitive, making the Bank of Japan’s 2 percent inflation target a more distant prospect. (source Bloomberg.com)
Gold Spikes up
spike in gold is due to flight to safe heaven assets, the black swan event of Brexit makes the possibility of FED tightening unlikely this year which is positive for gold
source: goldprice.org
source nasdaq.com
source: goldprice.org
Crude down due to recession worries in EU
source nasdaq.com
Brexit Poll Trends
How the betting market got it totally wrong
Few theories on this How did the wisdom of crowds fail so spectacularly? One theory holds that the Brexit market was swayed by a small number of big bets by optimistic “remain” voters, who tended to be richer than those who supported “leave”. People who found it unfathomable that Britain could vote to leave, primarily because such an event had never happened before, probably in turn succumbed to confirmation bias.They may have also fallen victim to the “availability heuristic”, presuming that the EU vote was likely to resemble that of Scotland’s 2014 independence referendum (source economist.com)
Post Brexit views from EU titled Euroskepticism
source pewglobal.org
Currency Market (USD/Yen/Bitcoin up while Euro/Pound hammered)
Bond yields plunges
The yield decline reflects a growing chorus of investors and analysts who say Britain’s political earthquake will force the U.S. central bank to abandon its plans to boost interest rates this year.
source Bloomberg
Brexit Adds $380 Billion to Global Negative-Yielding Bond Pile
source Bloomberg
Fed Rate Hike probability shot down
Note: Post Brexit Fed rate hike chances drops to zero mostly, 4.8% in current quarter and 12-22% by year end but mostly zero throughout the year. In fact driven out of options, FED could well be considering Negative Interest Rates (NIRP) in US
source @jsblokland on twitter
Volatility Index (VIX) spikes 50% on Brexit
chart source Google finance
Persistent weakening in US markets in all time frames
10 year, 1 year, 1 month chart shown below
The pattern is clearly developing into a slower version of 2008
chart source Google finance
UK Default risk shoots up
source zerohedge
Credit Default Swap soars for European countries
source markit.com
European/American Banking & Financial stocks hammered 10-20% down
Barclays, Deutsche, RBS, Barclays, Goldman, JP Morgan, CItigroup .. they all fell down
source Google Finance
Deutsche bank looks particularly disturbing
source zerodha
Stocks related to real-estate and property market come down
London property market has been in a bubble phase for sometime now along with others like SFO and many cities in Australia. Atleast UK bubble might pop which could lead to a chain reaction around the world
source @AlliHayman
Industry Impact
source yahoo finance
Brexit Vs Lehman comparison
This does not give the most accurate picture due to base effect, take into account percentages over absolute numbers
source CNBC on twitter
Over $2.1 trillion in value lost in stocks globally
Huge wealth erosion happened for the wealthiest in the world since their net worth is very closely linked to stock markets now. 400 richest lost $127 billion in one day.
Worldwide markets hemorrhaged more than $2 trillion in paper wealth on Friday, according to data from S&P Global, the worst on record. The prior one day sell-off record was $1.9 trillion back in September of 2008
source CNBC
Brexit roadmap
source BBC.com
reversing Brexit
source yahoo finance
Other EU countries in line for exit referendum
Although you see leave vote far below 50% in many note that this does not mean rest are in remian camp. There could be a large percentage in undecided
source Bloomberg
rate cut probability by Bank Of England rises to negate the effects of Brexit
Other Important Events:
- British PM David Cameron has resigned, bringing an abrupt end to his six-year premiership, after the British public took the momentous decision to reject his entreaties and turn their back on the European Union. (source theguardian)
- Scotland's government began moves Friday to hold a new referendum on independence from the U.K. after the "Brexit" vote, saying it faced being taken out of the European Union against its will. (source NBC News)
- Bank of England Governor Mark Carney said on Friday the central bank was ready to provide 250 billion pounds of additional funds to support financial markets after Britain voted to leave the European Union. (source reuters.com)
- Italy’s 5 Star Movement Calls for Euro Referendum (source The Wall Street Journal)
- "We’ve seen markets sell off and we’ve seen marking down of assets on books, we haven’t yet seen the big margin selling that will come in soon, I’m sure there will be some hedge funds that will declare bankruptcy. There are going to be some add on effects that could start to gather some momentum.” (source Max Keiser on RT)
- Leaving the EU would hit British living standards, stoke inflation and wipe up to 5.5% off GDP. The IMF said last month that Brexit could spark a stock market crash and a steep fall in house prices. Under that scenario, the UK would fall into recession in 2017, IMF officials said. “The implication would be negative growth in 2017,” said one official briefing reporters in a conference call. (source theguardian.com)
- UBS derivatives strategist Rebecca Cheong, who picked up Kolanovic' baton, and according to whom selling of US stocks in the aftermath of Brexit is just getting started for quantitative traders who make buy or sell decisions based on price trends. According to Cheong, such sales could total as much as $150 billion should equity volatility persist in the S&P 500 Index for the next week. “They’ll be buying volatility and selling the S&P,” said Cheong. (source zerohedge)
- Central banks will carefully monitor market functioning and stability, and cooperate closely,” he said in a statement. The Global Economy Meeting is a discussion forum that includes the heads of central banks in 30 developed and emerging-market economies. (source Marketwatch.com on Basel for the BIS’s annual meeting)
- Banks have already begun to take action to shift operations out of the UK, with the governor of France’s central bank warning on Saturday that Britain’s financial services groups were at risk of losing their right to operate across the EU. (source cnbc.com)
- Treasury slipped to 1.58% Friday, dragging mortgage rates and other long-term borrowing costs with it. One reason for the drop is that fixed-income investors reckon that global central bank policy will be looser after the vote, with the Bank of England, the European Central Bank and the Bank of Japan likely to ease policy, and the Federal Reserve putting off its plans to raise rates until the end of this year, at the earliest. (source WSJ.com)
- Of course, there is a possibility that the trouble in the U.K. could expose unknown fragilities in global credit markets that spill over to the U.S (source WSJ.com)
