Europe

With the UK's referendum on EU membership due in four months, it appears the market is gravely concerned about the possibility of Brexit. Despite the unleashing of Project Fear (both military and corporate fearmongery), cable (GBPUSD) has crashed 2.3% (the most in 7 years) to its lowest in 7 years, and both FX volatility and credit risk Brexit indicators are soaring to record highs.

Just as we warned, Friday's dubious gains have evaporated and cable is crashing to 7 years lows...

As Deutsche Bank's Jim Reid notes,

For the likes of Paul Krugman, the Riksbank provides a cautionary tale for central banks wary of committing so-called “policy mistakes.”

Back in 2010, the bank started to hike rates. That decision halted a decline in unemployment and shortly thereafter, it became apparent that “the rock star of the recovery had turned itself into Japan." Or so Krugman says.

• Futures sharply higher as oil extends gains (Reuters)
• Global Stocks Gain on Rising Commodities Prices, China (WSJ)
• Pound in freefall as Boris Johnson sparks Brexit fears (Telegraph)
• Pound Slides Most Since 2009 as Johnson Backs ‘Brexit’ Campaign (BBG)
• Donald Trump, Hillary Clinton Seize Leads for Their Parties’ Nominations (WSJ)
• Oil Glut Will Persist Into 2017 as IEA Sees Prices Capped (BBG)
• Japanese Seeking a Place to Stash Cash Start Snapping Up Safes (WSJ)

The overnight news was decidedly downcast, with first London mayor Boris Johnson voicing his support for Brexit leading to a collapse in the pound, validating our Saturday warning and then some, resulting in the biggest drop in cable in over a year over fears that the EU will lose one of its most critical members...

While in the US market breaks practically always happen when the market is sharply lower, and are intended to halt any downward momentum, in Europe this simple relationship has yet to be perfected, and for the past hour, following what it announced were technical issues, the Deutsche Boerse-owned Eurex derivatives exchange where futures on such indices as the DAX and Switzerland trade, has suspended trading in its T7 system "until futher notice."

Sellers will just have to wait.

Link for the latest news on the trading halt.