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24Jun2016 Pre-Market Commentary: Brexit Is In, US Dollar Up, Crude Down SPY Off 3%

Written by Gary

Brexit approved in U.K., US stock future indexes have fallen sharply. The SPY is down over 3%, the DOW off 500 points as World stocks headed for one the biggest slumps on record today. The Sterling sank 10 percent in value to its weakest since before the 1985 Plaza Accord and the US dollar has risen significantly.


Here is the current market situation from CNN Money

European markets are sharply lower today with shares in Germany off the most. The DAX is down 6.79% while France's CAC 40 is off 6.75% and London's FTSE 100 is lower by 3.84%.

What Is Moving the Markets

Here are the headlines moving the markets.

World stocks routed as Britain votes for EU exit

LONDON (Reuters) - World stocks saw more than $2 trillion wiped off their value on Friday as Britain's vote to leave the European Union triggered 5-10 percent falls across Europe's biggest bourses and a record plunge for sterling.

Stock futures drop after Britons vote to abandon EU

(Reuters) - U.S. stock futures slid in premarket trading on Friday after Britain's vote to quit the European Union delivered the biggest blow to the global financial system since the 2008 financial crisis.

Good Morning America: Britain just voted out of the EU ... What's that mean for America?

NEW YORK (Reuters) - Britons have voted to leave the European Union, an outcome that has shocked global financial markets, sending stocks plunging and sovereign bonds and the U.S. dollar sharply higher.

Carney: BoE to use extra 250 billion pounds to help markets, consider more action

LONDON (Reuters) - Bank of England Governor Mark Carney said on Friday the central bank was ready to provide 250 billion pounds ($345.93 billion) of additional funds to support financial markets after Britain voted to leave the European Union.

Britain's financial sector reels after Brexit bombshell

LONDON (Reuters) - Britain's 2.2 million financial industry workers face years of uncertainty and the risk of thousands of job cuts after the country voted to quit the European Union, leaving question marks over London's status as Europe's premier financial center.

China-backed AIIB approves $509 million for first four projects

BEIJING (Reuters) - The board of China-backed Asia Infrastructure Investment Bank (AIIB) approved $509 million in investments for its first four projects on Friday.

Sterling hits 31-year low on Brexit, central banks hint at intervention

LONDON (Reuters) - Sterling sank 10 percent in value to its weakest since before the 1985 Plaza Accord on Friday after Britain voted to leave the European Union, triggering a global rush of capital into the traditional security of the yen and the Swiss franc.

Exclusive: Nigeria's Dangote shifts focus from cement to oil and gas

LAGOS (Reuters) - Africa's richest man, Aliko Dangote, plans to launch Nigeria's first private crude oil refinery by 2019 while almost doubling his cement production on the continent by adding plants in eight countries as he shrugs off a regional economic downturn.

Bafin fines Deutsche Bank for anti-money laundering flaws: source

FRANKFURT (Reuters) - German financial watchdog Bafin last year imposed a fine of 40 million euros ($44 million) on Deutsche-Bank for flaws in its systems designed to prevent money-laundering, a person close to the matter said.

Italy's Northern League To Launch EU Referendum Campaign Next

Shortly after the final Brexit result was released, first Netherlands and then France quickly warned they too would proceed with their own referenda. They are not alone: moments later the head of Italy's Northern League Said "Now it's our turn' After U.K.

As Dow Jones reports, Italy's anti-immigrant and euroskeptic Northern League will start a petition calling for a law that allows a referendum on whether the country wants to exit the European Union, its leader said on Friday. In a news conference following the announcement of the U.K.'s decision to leave the EU, Northern League's head Matteo Salvini said that it was time to give Italians a vote on their EU membership, as the citizens of Britain have just done.

"This vote was a slap in the face for all those who say that Europe is their own business and Italians don't have to meddle with that," Mr. Salvini said.

The Northern League launched a campaign against the euro in 2014, but it has been since overshadowed by the anti-immigrant campaigns on which it has built up its electoral support.

Northern Leage is not alone: recall that earlier this week, the anti-establishment 5 Star Movement, emboldened by dramatic victories in Italy's recent mayoral elections in which Virginia Raggi, a 37-year old lawyer, was elected Rome's first female mayor by winning a stunning 67% of the vote in the second round, also revived plans for a referendum on leaving the euro.

"Please Don't Pop My Bubble!"

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

So ride your bubble of choice up--stocks, bonds, housing, bat guano, take your pick--but it's best to keep your thumb on the sell button.

One person's bubble is another person's "fair market value." What is clearly an outrageously overvalued asset perched at nosebleed levels of central-bank fueled speculative euphoria is to the owner an asset at "fair market value."

But beneath the euphoric confidence that valuations can only drift higher forever and ever is the latent fear that something could stick a pin in "my bubble"-- that is, whatever bubblicious asset we happen to own and treasure as a source of our financial wealth could be popped, destroying not just our financial bubble but our psychological bubble of faith in permanent manias.

Consider housing prices, which are clearly in an echo-bubble of the Great Housing Bubble of 2000-2007. (Chart courtesy of Market Daily Briefing.)

The psychological underpinning of all bubbles and echo bubbles is on display here. In the first bubble, those benefiting from the stupendous price increases are not just euphoric at the surge in unearned wealth--they believe the hype with all their hearts and minds that the bubble is not a bubble at all, it's all just "fair market value" at work.

In other words, the massive increase in unearned personal wealth is not just temporary good fortune--it is permanent, rational and deserved.

Alas, all bubbles, no matter how euphoric or long-lasting, eventually pop ...

"We Look For European Stocks To Make New Lows Over The Next Days" - JPM Reacts To The Post-Brexit World

All throughout the artificial short squeeze-driven, central bank-facilitated market rally since the February lows, JPM has been advising clients to sell into the rally. For those few who listened, congratulations. Of course most, who simply rode momentum higher and added, well - we can only hope you have enough in your margin account when the clerks come calling.

And with that said, this is what JPM's Mislav Matejka happens next after the market's initial reaction.

UK has voted to leave EU. This is an event which will have long-lasting adverse repercussions for the markets, especially for the Eurozone, in our view. Initial reaction is likely to be very negative given the rally seen over the past few days, and the resulting complacency which set in in the markets.


We would look for SX5E to make new lows for the year over the next days. Assuming SX5E P/E multiple at February lows of 11.4x, this would put SX5E at 2600-2650.

The initial markets reaction is likely to be very negative, especially given the rally seen over the past few days. Equities should undershoot their last week's lows, when the betting odds' probability of Brexit increased. Peripheral equities, which rebounded the most in the last few days, are likely to see the biggest losses in the near term.

The key strategy remains to be OW low beta and defensives. We ...

The Referen-Doom: EU, Merkel, ECB All Scramble To Calm Panic

In the aftermath of the Brexit vote, the entire concept of a European Union suddenly finds itself existentially threatened, with demands for referenda issued overnight by the Netherlands, France, Italy and moments ago Scotland. This is why all the highest European institutions have been unleashed in an attempt to quell a panic that the EU has never felt, not even during the depths of the recurring Greek insolvency crisis (as we noted last night, it would be ironic if Greece ends up the last country in a European "Union" as all of its peers depart).

Below is the joint statement released moments ago by Europe's top unelected oligarchs, the ones that the people of UK declared independence day against, including Donald Tusk, President of the European Council, Martin Schulz, President of the European Parliament, Mark Rutte, holder of the rotating Presidency of the Council of the EU, and Jean-Claude Juncker, President of the European Commission, on the outcome of the United Kingdom referendum.

President Tusk, President Schulz and Prime Minister Rutte met this morning in Brussels upon the invitation of European Commission President Juncker. They discussed the outcome of the United Kingdom referendum and made the following joint statement:

"In a free and democratic process, the British people have expressed their wish to leave the European Union. We regret this decision but respect it.

This is an unprecedented situation but we are united in our response. We will stand strong and uphold the EU's core values of promoting peace and the well-being of its peoples. The Union of 27 Member States will continue. The Union is the framework of our common political future. We a ...

Brexit: A Seismic Slap in the Face of Markets

Markets got Brexit dead wrong. Now comes the fallout.

Why Finding 'Brexit' Bargain Stocks Requires Digging Deep

Bargain-hunters need creative thinking and an appetite for risk as they look through the wreckage in markets following the 'Brexit' vote. Even as the FTSE 100 index plunged 4% in the first hour of trading, shares rose in British American Tobacco, which makes Lucky Strike and Dunhill cigarettes, and GlaxoSmithKline.

Why Banks Are Taking Brunt of 'Brexit' Crash

The Brexit result hammered bank stocks, but this isn't about a 2008-type panic run on the financial system.

The Wall Street Journal: When Cameron sealed his and the U.K.'s fate by calling Brexit vote in first place

Scarcely a year after a triumphant general-election victory, British Prime Minister David Cameron is already on his way out of office following an epic miscalculation that on Thursday resulted in U.K. voters opting to leave the European Union.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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