"I think indeed the comparison does not apply because the reaction to Lehman as you may recall was that several markets froze... That was not the case this time."Actually... that's not exactly true is it!!
We are watching what happens when the economy of a developed nation totally implodes. Could you imagine living in a nation where all this is going on? Most Americans could not even conceive of such a thing. But of course the truth is that up until just recently most Venezuelans could not either. In fact, just a couple years ago Venezuela was one of the most prosperous nations in all of South America... There are all sorts of signs that the thin veneer of civilization that we all take for granted in the United States is starting to crumble as well.
The collapse continues as Friday's bounce in GBPUSD is rapidly being erased. Cable is now down 2% back to a 1.33 handle as FTSE Futures tumble 4% at the open. The big question remains will China devalue the Yuan fix... or 'surprise' with an RRR cut?
"The status quo in Europe is over. We will have to get used to this. Political risk has risen, and we will be dependent on central bank interventions, the calmness of markets, and measured political decision-making to keep the world's economic growth momentum and thus support risk assets."
There was a reason why we warned readers two days ago that "The World's Central Bankers Are Gathering At The BIS' Basel Tower Ahead Of The Brexit Result": simply enough, it was to facilitate an immediate response when a worst-cased Brexit vote hit. And that is precisely what has happened today in the aftermath of the historic British decision to exit the EU. It started, as one would expect, with Mark Carney who said the Bank of England is ready to pump billions of pounds into the financial system as he stands at the front line of Britain’s defense against a Brexit-provoked market crisis.
Nmerous traders have suggested, that Brexit - should Remain indeed be victorious - could be one of the more significant "sell the news" events in recent years. However, an even more interesting hypothesis was proposed by Gregory Peters, senior investment officer at Prudential Fixed Income, who told Reuters on Tuesday that he thinks U.S. stocks and bonds are a "great" buying opportunity if Britain votes to exit the European Union.
On the day voting for the UK referendum finally began, what started off as a trading session with a modest upward bias, promptly turned into a buying orgy in painfully illiquid markets shortly after Europe opened as an influx of buy orders pushed European stocks 2% higher, propelled by cable which was above 1.49 for the first time since December and USDJPY climbing over 1.05 in sympathy, following the release of the final Ipsos Mori poll which showed Remain at 52% to 48% for leave.
- "My 60 years of experience tells me the pound will plummet, along with your living standards. The only winners will be speculators" - George Soros - "All the evidence shows that Brexit would be a disaster" - Jacob Rothschild - "You cannot in the end protect people from the economic shock that leaving the EU would bring about." - George Osborne