The Brexit Boogie: A vote that shook the world


Is the world headed into another Great Recession even before that shockwaves of the last one have settled down?

When one of the world’s two major financial centers pulls out of its continental base, there’s good cause for concern.

But that’s just one of the issues raised by Thursday’s vote.

Here’s a roundup of rumbles. . .

British buyers remorse?

Even before the dust settled, Brits were flocking online to sign a petition for a do-over.

From Agence France-Presse:

More than two million people have signed a petition calling for a second referendum, after a shock vote to pull Britain out of the EU, an official website showed Saturday.

The website of the parliamentary petition at one point crashed due to the surge of people adding their names to the call for another nationwide poll following Thursday’s historic vote.

“We the undersigned call upon HM Government to implement a rule that if the remain or leave vote is less than 60 percent based (on) a turnout less than 75 percent there should be another referendum,” says the petition.

The blame game begins

Guess who’s catching the heat?

Hint: He’s already resigned his job in disgrace.

From euronews:

Blame for the failure to convince British voters to remain in the European Union lies at the door of David Cameron, European Commissioner Günther Oettinger told Euronews.

The Commissioner for the Digital Economy and Society told Euronews that the decision by the Prime Minister to “order” the Commission to stay “out of the game” was a mistake.

Asked whether Cameron was to blame, Oettinger responded: “ I think so, yes. What he did is not acceptable.”

The Commissioner insisted that Scotland and Northern Ireland, which both voted overwhelmingly for ‘remain’, could only rejoin the European Union as independent nations. He predicted that Scotland would “probably” split from the rest of the United Kingdom.

And fear runs rampant

Shrinks call it Separation Anxiety Disorder, and it’s an ailment running rampant these days, especially in Berlin.

From Sky News:

Germany fears France, Austria, Finland, the Netherlands and Hungary may follow the UK and leave the EU, a government paper says.

The finance ministry strategy paper expresses concern that the UK’s historic vote may trigger a Brexit domino effect across Europe, according to the German newspaper Die Welt.

It recommends that the EU enters into negotiations aimed at making the UK an “associated partner country” for the remaining 27 nations.

As it stands, the UK’s exit may cause Germany’s contribution to the EU’s budget to rise by 3bn euros (£2.44bn) a year, the paper adds.

And there’s good cause to worry, reports Reuters:

Britain’s vote to leave the European Union fired up populist eurosceptic parties across the continent on Friday, giving fresh voice to their calls to leave the bloc or its euro currency.

Right-wing and anti-immigrant parties in the Netherlands, Denmark, Sweden and France demanded referendums on membership of the union, while Italy’s 5-Star movement said it would pursue its own proposal for a vote on the euro.

Geert Wilders, leader of the Dutch anti-immigrant PVV party, said he would make a Dutch referendum on EU membership a central theme of his campaign to become prime minister in next year’s parliamentary election.

“I congratulate the British people for beating the political elite in both London and Brussels and I think we can do the same,” Wilders told Reuters. “We should have a referendum about a ‘Nexit’ as soon as possible.”

After the jump, Boldness in Bratislava, a British downgrade, trillions in losses, the pain in Spain, grief in Greece, troubles in Tokyo, and a Schadenfreude alert. . .

Boldness in Bratislava

One source of Berlin angst, via Deutsche Welle:

On the heels of the UK’s vote to withdraw from the European Union, the far-right Our Slovakia People’s Party (LSNS) has announced that it will begin collecting signatures next week to set up a referendum for the country to do the same.

“It is high time Slovakia, too, left this sinking European Titanic” said party leader Marian Kotleba on Saturday. The party holds 14 seats in Slovakia’s 150-seat parliament.

Slovkia’s Prime Minister Robert Fico (photo), whose center-left coalition controls the country’s parliament, called for opposition members to act responsibly on the issue.

“Destruction and hatred don’t lead anywhere,” said Fico, who is also the leader of the party Direction – Social Democracy (Smer SD).

And a source of major British angst

If you’re a global world capital center, you’ve got good cause for concern where your own credit-worthiness has come into doubt.

From Reuters:

Ratings agency Moody’s said Britain’s creditworthiness was now at greater risk after voting to leave the European Union, as the country would face substantial challenges to successfully negotiate its exit from the bloc.

Moody’s assigned a negative outlook to its “Aa1″ rating for British government debt after a Thursday referendum showed that a clear majority of Britons wanted to leave the EU, prompting Prime Minister David Cameron to announce he would resign.

“During the several years in which the U.K. will have to renegotiate its trade relations with the EU, Moody’s expects heightened uncertainty, diminished confidence and lower spending and investment to result in weaker growth,” the agency said.

Losses numbered in the trillions

Yep, that’s those numbers followed a dozen zeroes, the kind neweded to reckon the immediate losses totalled up in global financial markets in the wake of the Brexit.

From Reuters:

Global stock markets lost about $2 trillion in value on Friday after Britain voted to leave the European Union, while sterling suffered a record one-day plunge to a 31-year low and money poured into safe-haven gold and government bonds.

The blow to investor confidence and the uncertainty the vote sparked could keep the U.S. Federal Reserve Board from raising interest rates as planned this year, and even spark a new round of emergency policy easing from major central banks.

The move blindsided investors, who had expected Britain to vote to stay in the EU, and sparked sharp repricing across asset classes. Mainland European equity markets took the brunt of selling as investors feared the vote could destabilize the 28-member bloc by prompting more referendums.

The pain in Spain

Is quite simple to explain.

From El País, word that one of the countries hardest hit by the Great Recession has been hit again:

The Ibex sustained the greatest losses of its entire 24-year history on Friday, when news of a Brexit victory pushed Spain’s benchmark stock market index down 12.35% at closing time.

The Friday tumble breaks the prior record for daily losses, which was set in October 2008 following news of the Lehman Brothers debacle. On that day, the Ibex retreated 9.14%.

Acting Prime Minister Mariano Rajoy, who is facing a general election this Sunday, came out to issue “a message of calm to the markets” shortly after David Cameron announced his plan to step down over the referendum results.

Rajoy said that the Spanish financial system “has solid conditions” to face the market turbulence spreading across the world.

And the grief in Greece

Yet another Great Recession casualty bites the bullet, via To Vima:

The British referendum result has caused a worldwide stock market crisis which also affected Athens, where the general price index dropped by 13.42% to 534.78 points.Transactions were valued at 161.67 million euros and the yield of the ten-year bond closed at 8.86%.

Friday’s major drop is the third largest since 1987. On Friday the blue chip index shrunk by 15.85% and the midcap index by 9.75%. In the past week of trading the index has dropped 8.83%, while since the start of the year the index has retreated by 17.55%.

The banking sector suffered 29.68% losses, with Eurobank’s share dropping by 30%, Alpha Bank by 29.66%, Piraeus Bank by 29.60% and the National Bank by 29.45%.

The trouble in Tokyo

Where a strong yen makes recovery harder.

From News On Japan:

As the U.K. contemplated life after Europe on Friday morning, Japan’s yen made its biggest surge against the U.S. dollar since the midst of the global financial crisis in 2008.

Touching less than 99 yen to the dollar, this brings Japan’s currency back to where it started just as Abenomics was ramping up in 2013. With interest rates already negative, a weak currency is one of the few tools Japan has at its disposal. A strong currency will be devastating for efforts to engineer inflation.

Japan will need to prepare a response. Currency intervention seems likely, though history shows fighting against the tide of currency movements usually only helps in the short term, especially if such moves aren’t coordinated with other central banks. And the BOJ, which has held fire in recent months on further easing, now has to prove it has mojo to move markets. On this score, the prospects seem dim.

Japan is already in negative-rate territory, and with U.S. 10-year Treasury yields plunging near multiyear lows Friday, the differential between owning U.S. assets and Japanese assets is shrinking again. This has long been a driver of the yen versus the dollar.

And to close, a Schadenfreude alert

Couldn’t happen to more deserving fellows. . .

From Vanity Fair:

Anxious investors bracing for an uncertain geopolitical crises and the possibility of a European recession sought refuge in the relative safety of gold and government bonds. Volatility went through the roof, while oil prices steeply dropped.

Of course, fears persist about how and when this concern on Wall Street will trickle down to Main Street. But the world’s richest individuals felt the effects immediately. The world’s billionaires lost a total of $99 billion on Friday, according to the Bloomberg Billionaires Index. The top 10 richest men shed a combined more than $21 billion alone. Bill Gates’s fortune declined $2.4 billion, while Amancio Ortega saw $6 billion float away. Warren Buffett said goodbye to $2.3 billion, and Jeff Bezos, who, until recently has been on a tear, lost $1.6 billion. For both Koch Brothers, it was just below $1 billion, and Carlos Slim, $2.7 billion. Mark Zuckerberg, who famously earned $6 billion in an afternoon earlier this year, gave nearly $1 billion back in the same amount of time on Friday. Larry Ellison and Ingvar Kamprad’s fortunes were $1.6 billion and $1.9 billion lower, respectively.

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