European Union

A Look Inside Europe's Next Crisis: Why Everyone Is Finally Panicking About Italian Banks

Back in May 2013, we wrote an article titled "Europe's EUR 500 Billion Ticking NPL Time Bomb" in which we laid out the biggest danger facing European banks: non-performing loans. As of this moment, that time bomb may have finally gone off: as the WSJ writes overnight, the Brexit damage to the rest of Europe "could be more immediate and potentially more serious. Nowhere is the risk concentrated more heavily than in the Italian banking sector." Indeed, "Brexit could lead to a full-blown banking crisis in Italy." Here's why.

"The Dominoes Are Fallling": Three Largest UK Property Funds Freeze $12 Billion In Assets, More To Come

In an episode painfully reminiscent of the Bear hedge fund "freezes" that preceded the bank's 2008 collapse and the great financial crisis, first Standard Life halted trading in its property fund, followed hours later by both Aviva and M&G which likewise announced they are suspending trading in their own portfolio funds. And, as Bloomberg summarizes, three of the U.K.’s largest real estate funds have frozen almost 9.1 billion pounds of assets after Britain’s shock vote to leave the European Union sparked a flurry of redemptions.

Theresa May Wins Round 1 Of Tory Leadership Ballot, Demands Early Talks On Britain Departure From EU

Moments ago, UK Home Secretary Theresa May largely as expected, topped the first ballot of Conservative members of Parliament in the contest to replace David Cameron as party leader and prime minister. Former Defence Secretary Liam Fox came last, meaning he is eliminated from the race. This is important because while some have assumed that May ultimately winning the race for next UK leader and PM could result in some or all unwinding of Brexit, today the UK Standard reported that May "squared up to Brussels boss Jean-Claude Juncker by demanding early talks on Britain’s exit from the European Union."

Hungary Will Hold A Referendum On October 2 To Halt Inflow Of Migrants

Hungary will hold a referendum on Oct. 2 on whether to accept any future European Union quota system for resettling migrants as Prime Minister Viktor Orban's government steps up its fight against the EU's migration policies. "The Hungarian government asks Hungarian citizens to say no to mandatory resettlement and to say no to the immigration policy of Brussels. Only Hungarians can decide with whom we want to live in Hungary."

Swiss Interest Rates Plunge To Negative Out To 50 Years

With the short-end of the Swiss yield curve yielding below -100bps, it was only a matter of time before things went entirely mad at the long-end and today for the first time in history Swiss 50Y yields have tumbled below zero (trading as low as -2.7bps) as US Treasury yields tumble to fresh record lows.

Frontrunning: July 5

  • Pound Tumbles to 31-Year Low as Its Post-Brexit Selloff Resumes (BBG)
  • Bad Debt Piled in Italian Banks Looms as Next Crisis (WSJ)
  • Stock Market to Bond Market: ‘La-La-La I Can’t Hear You' (WSJ)
  • A Prime Minister, a Referendum and Italy’s Turn to Get Worried (BBG)
  • Brexit Vote Paralyzes Companies Across Europe  (WSJ)

Bank Of England Unveils First Easing Measures After Brexit

In its first official easing act, the Financial Policy Committee lowered the countercyclical-capital buffer rate for UK exposures to zero from .5% of risk-weighted assets in a move that it said would raise the capacity for bank lending to households and businesses by as much as £150 billion. "This action reinforces the FPC’s view that all elements of the substantial capital and liquidity buffers that have been built up by banks are to be drawn on, as necessary" the committee said in a statement.

"China Is Headed For A 1929-Style Depression"

“The government is allowing speculation by providing cheap financing,” Andy Xie exclaimed, China “is riding a tiger and is terrified of a crash. So it keeps pumping cash into the economy. It is difficult to see how China can avoid a crisis.”

ETF Securities Reports Biggest One-Day Gold Inflow Since Financial Crisis

It never ceases to amaze how vastly different the investment styles of gold paper vs physical traders are: while we have documented previously how the latter tend to buy progressively more the lower the price, "investors" in paper-derivatives such as ETFs and ETPs are quite the opposite, where only momentum matters. Once a reflexive buying spree is unleashed, paper buying begets even more paper buying. Nowhere is this more evident than in today's daily report of ETF Securities, where "inflows into gold ETPs of US$263mn on Friday 1st July were at their highest since inception."

Nigel Farage Steps Down As UKIP Leader, Adding To Post-Brexit Political Turmoil

Nigel Farage, UKIP leader and passionate advocate for the UK to leave the European Union, announced unexpectedly today that he is stepping down as party leader, just days after he led a successful, and historic, campaign to Leave the European Union. Speaking in Westminster, Farage said the Brexit referendum was about Britons taking their country back, and having succeeded at that, Farage now "wants his life back.” His resignation completes the recent chaos in UK politics which has seen both the Conservative and Labour parties scramble to find new leadership in the aftermath of the Brexit vote.

Trump Takes Aim At The Global Elite

"The people of the United Kingdom have exercised the sacred right of all free peoples... Come November, the American people will have the chance to re-declare their independence. They will have the chance to reject today’s rule by the global elite, and to embrace real change that delivers a government of, by and for the people. I hope America is watching, it will soon be time to believe in America again."

Italian Banks Tumble, Monte Paschi Plunges To Record Low After ECB Letter

Italy's troubled Monte Paschi was halted after tumbling for yet another day to fresh new record lows, while the Italian bank sector tumbled in Milan on Monday amid fresh concerns the country’s lenders are under pressure to raise capital to bolster their finances. This follows a statement by Italy's third largest bank that the ECB has asked Monte Paschi to reduce its load of soured debt to 14.6 billion euros ($16.2 billion) in 2018 from 24.2 billion euros at the end of 2015.