European Union

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.

Precious Metals Surge Continues, As Does Italian Bank Pain, In Holiday-Shortened Session

In today's US holiday-impacted session, the biggest overnight story was the dramatic surge in precious metals, which saw silver briefly soar above $21 following a Chinese short squeeze sending the metal as much as 7% higher overnight, its biggest one day gain since December 1, 2014. As we reported overnight, silver touched a two-year high and gold rallied for a fourth day after the Brexit vote spurred demand for havens. The catalyst is familiar: speculation central banks in some of the world’s leading economies will step up monetary stimulus in the wake of Britain’s decision to leave the European Union.

Are We Living In "A Riskless World", Deutsche Asks

"Who of the big boys of central banking can realistically make a difference here is unclear to us. The Fed was caught wrong-footed in all of this, between domestic news (weak non-farms) to international. The ECB and BOJ are tapped-out; as in, their actions at this point are delivering more harm than benefit (underperforming equity and credit markets, lower credit issuance, substantial pressure on bank equities). In China, authorities are already dealing with the consequences of reopening the credit spigot earlier this year that reinforced concerns of a credit bubble popping there."