Top Headlines

Brexit Uncertainty Can be Contained: BIS – Profit & Loss

Despite an initial period of “uncertainty and adjustment” that is to be expected following the victory of the Brexit camp at the UK referendum last week, “with good cooperation at the global level, I am confident that uncertainty can be contained and that adjustments will proceed as smoothly as possible”, the general manager of the Bank for International Settlements (BIS), Jaime Caruana said yesterday.

Pound Bounces off Lows as Cameron Heads for Brussels Summit – FT (subscription)

Sterling has bounced off its lowest point in more than three decades, steadying a little after turmoil triggered by Britain’s decision to leave the EU.

Juncker Calls on UK to Clarify Position ‘Swiftly’ – fastFT (subscription)

Jean-Claude Juncker, president of the European Commission, has called on the UK to “swiftly” clarify its position regarding its plans to exit the European Union, warning the bloc cannot be “embroiled in lasting uncertainty”.

George Osborne Says He Will Not Enter Tory Leadership Race – BBC

Chancellor George Osborne says he will not seek to replace Prime Minister David Cameron when he stands down later this year.

UK Stripped of Final ‘AAA’ Rating – Daily Telegraph

Following Standard & Poor’s move earlier this evening to strip the UK of its final AAA rating, rival credit ratings agency Fitch has also downgraded the UK from AA+ to AA, warning of “an abrupt slowdown in short-term GDP growth” as a result of economic uncertainty brought about by the EU referendum.

Brexit Casts Doubt Over New EU and NATO Defense Strategy – Reuters

Britain’s departure from the European Union risks undermining Europe’s new defense strategy, days before NATO and EU governments sign a landmark pact to confront a range of threats from Russia to the Mediterranean, officials say.

Rome Mulls Capital Injection to Support Italian Banks After Brexit Shock – WSJ (subscription)

The Italian government is considering a capital injection for the country’s banking system, people familiar with the matter said, after Italian lenders were hit by a sharp selloff in banking stocks Friday, triggered by Britain’s vote to leave the European Union.

Regulatory News

What Are the Legal Ramifications of a Brexit Vote? – Profit & Loss

One of the big questions following the UK’s referendum result in favour of leaving the European Union is how this will impact the legal and regulatory framework that financial services firms operating there will be expected to adhere in the future.

CFTC Market Risk Advisory Committee Meeting: Agenda

Draghi: The International Dimension of Monetary Policy

In recent years central banks across advanced economies have been engaged in the same task, namely raising inflation and inflation expectations back to levels consistent with price stability.

Company News

VW in $14.7bn US Deal Over Rigged Cars – FT (subscription)

Volkswagen has agreed to a $14.7bn US package affecting nearly half a million rigged cars and to help fund zero-emissions technology in the country, according to two people familiar with the matter.

Soros Wagered Deutsche Bank Would Drop in Brexit Turmoil – Bloomberg

Soros Fund Management took a short position in Deutsche Bank AG of about 7 million shares as turmoil from the U.K.’s decision to leave the European Union sent bank stocks lower.

Market Savvy

No Intervention from BoE – Profit & Loss

Price action in sterling has led to some speculation that the Bank of England (BoE) has periodically stepped into the market to ‘smooth’ the move.

Brexit Friday Was ‘Most Volatile Day in FX Ever’ – fastFT (subscription)

Friday. Remember Friday? It felt pretty… frantic in the currency markets. Bank of America Merrill Lynch calculates that it was, in fact “the most volatile day in modern history.” Fun times.

Brexit Vote Leaves Markets Primed for a Rate Cut From the Bank of England – WSJ

Investors are expecting a rate cut from the Bank of England in the coming months, according to one key metric, following the U.K.’s unexpected vote to leave the European Union on Thursday.

Japan Should Not Give Up Right to Intervene – Reuters

Japan should not give up the right to intervene in currency markets if the yen sharply rises as it will threaten the nation’s economy, a key economic adviser to Prime Minister Shinzo Abe said on Tuesday, after Britain’s vote to exit the European Union caused market turmoil.

Japan Yields All Drop Below 0.1% First Time in Global Bond Surge – Bloomberg

Japan’s benchmark bonds are now all yielding less than 0.1 percent for the first time, leading a global surge in sovereign debt, as the U.K.’s decision to leave the European Union threatened to slow growth and keep the Federal Reserve from raising interest rates.

BIS: Global Financial Markets: Between Uneasy Calm and Turbulence

Financial markets experienced alternating phases of calm and turbulence in the past year, as prices in core asset markets remained keenly sensitive to monetary policy developments. Investors also closely followed growing signs of economic weakness in the main EMEs, especially China.

China Economy to Grow 6.6 Percent, Needs Policy Support: Government Think Tank – Reuters

China’s economy will grow at about 6.6 percent this year, and will need to be underpinned by policy support in the second half to counter downward pressures, according to the China Academy of Social Sciences (CASS).

North Korea May Have Resumed Counterfeiting Operation – Daily Telegraph

Pyongyang appears to be back in the fake currency business, with Chinese police arresting a North Korean agent after he attempted to pass a new batch of high-quality counterfeit $100 bills.