Bank of England

In a speech delivered at the Liverpool John Moores University on Monday, Bank of England head, and former Goldman partner, Mark Carney defended his central bank's near-zero borrowing costs which have been increasingly criticized by local politicians ever since the Brexit vote, claiming that central bank monetary policies have not been the cause behind wealth transfer.

Carney said the BoE's actions had softened the hit to Britain's economy since the global financial crisis, easing the blow for poorer households who suffer most from recessions.

While the term 'stress test' has been applied almost mockingly to European and US banks in an effort to create confidence for investors (because if the government sees risks 'contained' then why worry), this morning's Bank of England stress test results highlighted "capital inadequacies" for three major UK banks. While Barclays and Standard Chartered fell short, it is taxpayer-owned Royal Bank of Scotland that is slumping on a need to cut costs, raise capital, and sell assets.

European, Asian stocks rise as do S&P futures as OPEC ministers gathering in Vienna appeared to be set to announce a deal to cut oil production and prop up global prices. Oil has surged over 7% as a result, also pushing US TSY yields and the dollar higher.

With all eyes on Vienna, where optimism OPEC ministers will salvage a deal to cut production, oil has soared by over 6% reverberating through the financial markets, spurring oil’s biggest gain in two weeks and sending stocks of energy producers and currencies of commodity-exporting nations higher.

While the Bank of England voted unanimously 9-0 to keep rates on hold at 0.5%, what the market was far more focused on the BOE's latest gloomy scenarios about what would happen should the UK vote for Brexit on June 23. The BOE did not disappoint, and cautioned that that sterling could fall "sharply" and unemployment would probably rise, while in the press conference after the announcement BOE governor and former Goldmanite Mark Carney went all the way warning Brexit "could possibly lead to recession."

If yesterday's selloff had a specific catalyst, namely some of the worst consumer retail earnings seen in years, it merely undid the Tuesday rally which levitated global risk with no fundamental driver, aside for a 200 pip spike in the USDJPY.  Some central bankers may even say it was a "magical" levitation.