Tuesday June 28 2016 Housing and Economic stories

TOP STORIES:

ECB Blows €400bn on “Brexit Black Friday” for Bank Bailouts - (www.wolfstreet.com) Dealing with a Financial Crisis under cover of Brexit Chaos. Remember TARP, the Troubled Asset Relief Program that the US Congress approved to bail out banks and other companies during the Financial Crisis? $700 billion were authorized, later reduced to $475 billion. The Treasury eventually dispersed $432 billion. I bring this up because the ECB bailed out the European banks with more than TARP, in just one day: on Brexit Black Friday. The ECB saw what was happening to the shares of the largest banks on that propitious day. It saw a blooming financial crisis: The fiasco that happened to the Spanish and Italian banks was so enormous that it sent stock markets into their largest one-day plunges on record, of over 12% [ Brexit Blowback Hits Italian and Spanish Banks]. The Stoxx 600 banking index, which covers the largest European banks, plunged 14.5% on Friday. It’s down 29.3% year-to-date, 42% from its 52-week high, and 76% from its all-time high in May 2007 before the Financial Crisis and the euro debt crisis knocked the hot air out of the banks.

Global markets take $2tn Brexit hit - (www.ft.com) Global stock markets lost more than $2tn of value on Friday in the largest single day drop since at least 2007, as investors dumped risky assets and rushed into havens after the UK voted to leave the EU. The fall precedes what is expected to be a volatile week of trading when global markets reopen on Monday. Investors and strategists say that much of Friday’s decline was a “knee-jerk” move, unravelling last-minute confidence that drove up stock prices ahead of the referendum results. The slide included a $830bn loss on the valuation of US stocks, with $657bn struck from the benchmark S&P 500. The overall $2.1tn decline was the worst performance since S&P Dow Jones Indices started tracking data in 2007. “I don’t think the news came out with enough lead time to have institutional investment committees sit down and decide what to do,” said Thierry Albert Wizman, a strategist with Macquarie. “This is an automated response to what has happened. Human decision making will intervene.”

Brexit Blowback Hits Italian and Spanish Banks - (www.wolfstreet.com) The prophets of Project Fear reaped what they’d sown, as financial carnage spread across global markets on news that a slim majority of British voters had done the unthinkable by drowning out the relentless doomsaying and voting to leave the European Union. The pound sterling plunged 8% against the dollar, to $1.37, its lowest level in three decades. The euro fell 1.93%, in itself a huge one-day move for a major currency. UK stocks surrendered over 3% of their value. But that was nothing compared to the havoc unleashed in other European stock markets. Germany’s DAX plummeted 7%; France’s CAC 40 over 8%. But even that pales compared to what happened in Spain and Italy: the IBEX 35 plummeted 12.3% and the FTSE MIB 12.5%. It was their worst day on record.

 

Civil Uprising Escalates As 8th EU Nation Threatens Referendum – (www.zerohedge.com) It appears, just as we warned, that Brexit was indeed the first of many dominoes. Even before the Brexit result, a poll by Ipsos Mori showed that the majority of people in France and Italy want to at least have a referendum on leaving: Meanwhile, over 40% of Swedes, Poles, and Belgians are in the same boat. But now, as Martin Armstrong notes, Brussels simply went too far. They cross the line moving from an economic union to a political subordination of Europe. Now eight more countries want to hold referendums to exit the EU – France, Holland, Italy, Austria, Finland, Hungary, Portugal, and Slovakia all could leave.

Brexit baffled punters, pundits and fund managers to the very end - (www.reuters.com) Nearly everyone, from London gamblers to U.S. money managers got it wrong. Britain's vote to leave the European Union shocked pundits, investors and politicians alike, underscoring the inherent difficulty of forecasting such rare events.  On PredictIt, an online political events betting site operated by Victoria University in Wellington, New Zealand and U.S.-based partners, bettors had the probability of a “leave” camp win at just 16 percent on Thursday as British polls closed. Within four hours of the vote count, that had shot to 90 percent. The dramatic reversal caught many investors flat footed and showed how they have trouble hedging against such shocks even with the help of such tools as exchange-traded funds or computer algorithms designed to capture an electorate's social media vibe, economists, pollsters and fund managers said on Friday.

OTHER STORIES:

Founding EU members tell Britain: let's get this divorce done - (www.reuters.com)
U.K. Must Leave EU as Soon as Possible, EU Foreign Ministers Say - (www.bloomberg.com)
Scotland starts drive to stay in EU, independence option open: Sturgeon - (www.reuters.com)
Six founding EU states meet in Berlin to discuss Brexit - (www.cnbc.com)

Britain, EU at Odds Over Timing of Divorce Talks - (www.ap.com)
Brexit’s Article 50: How 250 words could chart Britain’s future - (www.marketwatch.com)
Brexit in Berlin: Merkel Sizes Up the Next EU Crisis - (www.spiegel.de)