U.S. stock index futures are lower this morning as investors assessed the implications of the Brexit. SPY is down -0.9%, WTI crude is still falling, currently in the high 46's and the USD is climbing to its highest level in two months. European bank shares are on track for their biggest ever two-day fall has driven the sterling to a fresh 31-year low against the dollar.
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 2.17% while London's FTSE 100 is off 2.06% and France's CAC 40 is lower by 2.05%.
LONDON (Reuters) - World stocks tumbled and European bank shares were on track for their biggest ever two-day fall on Monday as the political and economic fallout of Britain's shock vote to leave the European Union drove sterling to a fresh 31-year low against the dollar.
LONDON (Reuters) - The leaders of the campaign to get Britain out of the European Union sought to ease concerns about the country's uncertain economic future by giving public backing to Bank of England Governor Mark Carney and finance minister George Osborne.
NEW YORK (Reuters) - The stress tests created for banks by U.S. regulators after the 2008 financial crisis may prove their worth this week, providing a timely message on banks' hardiness in the midst of turbulence over last week's vote by Britain to leave the European Union.
BERLIN (Reuters) - German publishers have appealed a Berlin court's rejection of a case in which they accused Google of abusing its market power by refusing to pay them for displaying newspaper articles online, a lawyer for the publishers said on Monday.
WASHINGTON/NEW YORK (Reuters) - U.S. business investment, already heading for its worst slowdown since the global financial crisis, could decline further as Britain's vote to leave the European Union creates more risks for companies, economists say.
NEW YORK (Reuters) - Texas oilman Chris Faulkner built a high-profile public persona, raised millions for his oil and gas ventures and courted politicians. But the SEC has alleged that behind the scenes, he cheated investors out of $80 million to fund a "debauched" jet-setting lifestyle.
SINTRA (Reuters) - Federal Reserve Chair Janet Yellen is no longer due to speak at a global central bank summit starting on Monday, the second high-profile defection after the Bank of England's governor pulled out following Britain's vote to leave the European Union.
TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe on Monday instructed Finance Minister Taro Aso to watch currency markets "ever more closely" and take steps if necessary, in the wake of Britain's historic vote to leave the European Union.
Traders are frantic this morning as George Osborne's calming words have done nothing to halt the carnage. From Italian bankscrashing over 25% to British banks being halted, trading at record lows, to Deutsche Bank extending its Lehman-esque trend, as one veteran stock market trader in London said, "it's a f##king bloodbath, not even Draghi can save this one." The contagion is spreading however as UK defaul risk has spiked to 3 year highs and USD liquidty needs are surging with funding markets seeing serious distress.
It's everywhere...European Bank Stocks are down 23% in the last 2 days...
With global markets gyrating on every piece of news surrounding the Brexit drama, what's the timetable for UK-related (and all other macro) events this week and beyond?
For starters we should hear from David Cameron this morning who is scheduled to address Parliament, which follows a statement by Chancellor George Osborne who tried to "calm" markets and judging by the performance of bank stocks appears to have failed. Later today German Chancellor Merkel is also due to meet with President Hollande, PM Renzi and EU President Tusk in Berlin, so that's also worth keeping an eye on. That comes before what will perhaps be the big focus this week when tomorrow the commencement of a two-day EU leaders summit kicks off. EU member states will expect an analysis by the UK government of the outcome of the referendum and the first indications of how the UK would want to proceed, although it's highly unlikely that we see a rush into the withdrawal procedures of Article 50. Instead the EU is likely to want some clarity over the direction of negotiations, with any prevarication from the UK side seen as being likely to add uncertainty for the EU economy and adding to negative impact.
Looking ahead and along with the obvious focus on what will likely be a barrage of political meetings in coming weeks, some other events worth mentioning are the release of the services and composite PMI's on July 5th which should capture some of the sentiment during and after the referendum, Gilt auctions on July 5th and 7th, the Office for Budget Responsibility fiscal outlook on July 12th and of course the BoE meeting on July 14th.
Away from political news, there is the usual docket of purely economic news.
It's a quiet start to the week today (outside of the obvious EU debate) with the only data due out of the European session being the latest M3 money supply data for the Euro area. In the US we'll get the flash June services (expected to rise to 5 ...
It is somewhat ironic that the man who made a $1.5 billion profit on Black Wednesday in 1992 when he bet against the pound sterling ahead of the UK exit from the ERM would be the same one to suffer major losses on the same currency 24 years later. According to Bloomberg, Soros was long the pound before Britain's vote to leave the European Union on Friday, and didn't "speculate against sterling while he was arguing for Britain to remain," a spokesman said in an e-mailed statement Monday. In other words, Soros did put his money where his Op-Ed was.
As a reminder, before the Brexit vote, Soros warned in a Guardian Op-Ed that the pound could slump more than 20% against the dollar as voters were grossly underestimating the true cost of Brexit. Sterling plunged 8.1 percent on Friday to its lowest level in more than three decades, and tumbled again on Monday.
It is more interesting, however, what Soros' trade is following his Op-Ed sequel in which he said that the "catastrophic scenario that many feared has materialized, making the disintegration of the EU practically irreversible" adding that "The consequences for the real economy will be comparable only to the financial crisis of 2007-2008." If he is again trading as per his conviction, we would expect Soros to now be negative the EUR much more so than the GBP, which is now merely sliding lower in attempts to spook and punish the UK public into changing its mind into voting Remain in a potential second referendum as a result of the ongoing financial turbulence.
"Britain eventually may or may not be relatively better off than other countries by leaving the EU, but its economy and people stand to suffer significantly in the short to medium term, ...
From DB's Jim Reid, who succintly explains the "benefits" of 7 years of ZIRP, NIPR, Twist and QE... and leaves off with hopes for helicopter money.
The shockwaves and consequences around Brexit will resonate for years. It's probably an understatement to say that most in financial markets regret the UK's decision to leave but we should respect the forces that have been pushing us towards what has always been an inevitable political accident sometime soon. I wasn't sure whether the Brexit vote was the one but I was pretty convinced one was coming and this is probably not the last. Spain yesterday started a general election cycle (more below but relatively market friendly) of the largest 5 euro-area economies (Spain, Holland, France, Germany and Italy) over the next 18 months or so, not forgetting the US this November. Throw in the crucial senate reform vote in Italy in October and you've got plenty of opportunity for rebellion against the establishment that haven't managed to produce satisfactory enough growth for the lower paid/lower skilled to offset the forces of globalisation and immigration.
It's worth looking at the voting split in the UK's EU referendum based on polls compiled by Lord Ashcroft to get an idea of the disenfranchisement. In terms of socio-economic groups, 57% of ABs (upper/middle class - professional/managers etc) voted remain, 49% of C1s (lower middle class - supervisory/clerical or junior management/administrative), 36% of C2s (skilled working class) and 36% of DEs (Ds - semi & unskilled manual workers. Es - casual/lowest grade worker or state pensioner). So there's no escaping the fact that this is a class war. Whether its globalisation, immigration, inequality, poor economic growth or a combination of all of them it's quite clear from this and other anti-establishment movements that the status quo can't last in a democracy. Eventually you'll have a reaction. This is one such ...
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