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24Jun2016 Market Close: Markets Crash After Brexit, DOW Down 611 Points, Crude Looking To Fall Further And The Financials Put The Spooz In The Minus Territory

Written by Gary

US markets closed down in a waterfall fashion. The DOW closed sharply, over 600 points, the SPY down -3.6% and crude lower by 5%. After Britain's vote to leave the European Union spurred massive risk aversion and a rally in safe havens like the U.S. dollar that threatened to cut short a three-month-long recovery in global oil markets. Financials led all 10 S&P 500 sectors into negative territory.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall St. slumps as Brexit takes investors by surprise

(Reuters) - U.S. stocks fell sharply on Friday, with the Dow Jones industrial average dropping as much as 538 points, as Britain's vote to quit the European Union sent a shock wave through global financial markets.

World stocks tumble as Britain votes for EU exit

NEW YORK (Reuters) - Global stock markets lost about $2 trillion in value on Friday after Britain voted to leave the European Union, while sterling suffered a record one-day plunge to a 31-year low and money poured into safe-haven gold and government bonds.

U.S. business spending weak in May, Brexit seen adding more pressure

WASHINGTON (Reuters) - New orders for U.S. manufactured capital goods unexpectedly fell in May as demand declined broadly, indicating business spending will remain a drag on economic growth in the second quarter.

Brexit a knockout punch to Fed's interest rate divergence mantra

WASHINGTON (Reuters) - Britain's shock vote to leave the European Union may tie the U.S. Federal Reserve to near zero interest rates for far longer than expected, according to new research indicating the U.S. central bank is now tightly bound to international economic conditions.

Oil prices plunge 5 percent as Britain votes to leave EU

NEW YORK/LONDON (Reuters) - Oil prices settled 5 percent lower on Friday after Britain's vote to leave the European Union spurred massive risk aversion and a rally in safe havens like the U.S. dollar that threatened to cut short a three-month-long recovery in global oil markets.

UK 'Leave' vote deflates hopes for U.S.-EU trade deal

WASHINGTON (Reuters) - Britain's looming exit from the European Union is another huge setback for negotiations on a massive U.S.-EU free trade deal that were already stalled by deeply entrenched differences and growing anti-trade sentiment on both sides of the Atlantic.

Amid 'Brexit' selloff, some fund managers are bargain shopping

NEW YORK (Reuters) - Britain's unexpected decision to leave the European Union spurred a global stock market selloff that has inspired some opportunistic U.S. investors to move in the opposite direction.

Frankfurt or bust? Wall St bankers in London ponder life post Brexit

NEW YORK/LONDON/FRANKFURT (Reuters) - Big Wall Street banks are scouring Europe to find a new home for their traders, bankers and financial licenses now that London is on shaky ground as the region's preeminent financial hub.

Surprise Brexit vote unleashes scramble for dollars

NEW YORK (Reuters) - Britain's historic vote to leave the European Union sparked traders on Friday to scramble for dollars in an effort to buy U.S. bonds and to exit dollar-based bets based on U.K. voters favoring to stay in the bloc.

Brexistential Bloodbath - Dow Crashes 600 Points As Vol Explodes

Overheard in Britain today...

Well they did it... and no one expected it...


UK Stocks -3.14% worst since Jan 2016

US Stocks -3% worst since Aug 2015 (biggest opening gap down since 1987)

VIX +6pts biggest daly rise since Aug 2015 crash

Japan Stocks -7.9% worst since 2011 (Tsunami)

Spain Stocks -12.5% worst since 1987

Italy Stocks -12% worst since 1997

EU Banks -14.5% worst ever

US Banks -4.75% worst since Nov 2011

US 30Y Yield -14bps biggest drop since 2011

US 2Y Yield -14bps biggest drop since 2009

German 10Y Yield -14bps biggest drop since 2011

GBPUSD -11% biggest drop ever

USDJPY -4% biggest drop since 1998

EURUSD -2% biggest drop since Oct 2015

Gold +5% biggest day since Lehman 2008

Crude -4.4% most since Jan 2016

But apart from that everything is awesome.

What it looked like when Brexit news hit gold and currencies (h/t @NanexLLC)

The broad EU banking system bore the brunt of it...

& ...

After Brexit: The System Cannot Hold

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Well, they did it. A majority of Britons made clear they're so fed up with David Cameron and everything he says or does, including promoting the EU, that they voted against that EU. They detest Cameron much more than they like Nigel Farage or Boris Johnson. It seems that everyone has underestimated that.

Cameron just announced he's stepping down. And that points to a very large hole in the ground somewhere in London town. Because going through a list of potential leaders, you get the strong impression there are none left. Not to run the country, and not to negotiate anything with Brussels. Which has a deep leadership -credibility- hole of itself, even though the incumbents are completely blind to that.

But first Britain. The Leave victory was as much a vote against Chancellor George Osborne as it was against Cameron. So Osborne is out as potential leader of the Conservatives. Boris Johnson? Not nearly enough people like him, and he fumbled his side of the Leave campaign so badly his credibility, though perhaps not being fully shot, is far too much of an uncertainty for the Tories to enter the upcoming inevitable general elections with.

Who else is there? Michael Gove? Absolute suicide. Likeability factor of zero Kelvin. That bus these guys drove around which proclaimed they could get £350 million extra a year for the NHS health care system in case of a Brexit will come back to haunt all of them. Just about the first thing Farage said earlier when the win became clear, was that the £350 million was a mistake.

I guess you could mention Theresa May, who apparently wants the post, but she's an integral part of the Cameron clique and can't be p ...

Fed Credibility Collapses - Rate-Cut Now More Likely For Next Year

Just when you thought The Fed's credibility could not drop any further... it does. For the first time since the financial crisis, the market now sees a greater probability of a rate cut than a rate hike... for the next year.

As rate-hike odds collapse...

In fact, "bets" on an eventual dip into NIRP have surged to record highs, and we suspect even higher today...

[the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 - basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative]

It would appear that The Fed is going to need some new dots...

< ...

Greenspan: "This Is The Worst Period I Recall; There's Nothing Like It"

During a CNBC inteview today, when discussing the historic Brexit vote outcome, Alan Greenspan unleashed a fiery sermon that could have been prepared just by reading a random selection of posts from this website, the former Fed chairman told his shocked hosts that the current period, far from the raging "Obama recovery" spun every day by adaministration propaganda appratchicks and one that prompted the Fed to unleash a ridiculous rate hike cycle in December just as the US is sliding into a recession, and is instead the "worst period" he has seen, surpassing even the infamous Black Monday in severity.

"This is the worst period, I recall since I've been in public service. There's nothing like it, including the crisis — remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away. I'd love to find something positive to say."

EXCLUSIVE » Fmr. Fed Chair Greenspan to CNBC: "This is the worst period I recall since I've been in public service." pic.twitter.com/mu0p471fAm

— CNBC Now (@CNBCnow) June 24, 2016

Of course, what he is referring to was a market shock which was the result of a massive capital account imbalance resulting from the aftermath of the Louvre Accord coupled with the then trendy Portfolio Insurance (in which everyone was on the same side of the boat, much like now) and not so much an all out economic malaise. Which, however, does beg the question when a Black Monday-like market crash is coming?

...

Brexit: This Is Not a Drill -- Banks Get a Real-Life Stress Test

If there wasn't so much pain involved, investors in the biggest U.S. banks might enjoy the irony: little more than six hours after the U.S. Federal Reserve released its first round of bank 'stress test' results, financial firms and markets get a real-world version.

The Week After the Day After 'Brexit'

Markets may be calmer but edgy next week following the U.K. decision to leave the European Union.

'Brexit' Collateral Damage Puts Japan in Hot Seat

With "Brexit" sending the yen to its strongest level in years, the Bank of Japan will need to prepare a response.

The Fed: Fed's plans to raise rates again go awry

The Brexit vote has pushed back any rate hike until December or early 2017, economists said, with some suggesting a cut in rates may be next.

Thanks to Brexit, U.S. tourists may score discounts in the U.K.

Americans traveling to Britain will pay 8.7% less today than they did yesterday.

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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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