What will happen next is very difficult to assess, and this lack of visibility is the very reason why markets should remain very volatile and unpredictable over the months to come.
Politics will outshine market fundamentals, where the UK and the EU will enter into long and complex negotiations.
Brexit is just the beginning, to provide a negative future is the prestigious Financial Times in an editorial signed by Wolfgang Munchau, known for being generous with catastrophic forecasts, prefers the title "Italy could be the next domino piece to fall".
Proposing a comparison between the referendum just held in Britain, the date set for October in Italy on constitutional reforms, on which the President of the Council Matteo Renzi has bet a lot, and that the Referendum of 5 Stars leader, Beppe Grillo, has just reiterated it intends to play on the euro, the columnist goes on to hypothesize an Italy out of the single currency.
"Now the catastrophic scenario feared by many has materialized, making the collapse of the EU almost irreversible," – Soros wrote in a commentary published on the website of the newspaper consortium "Project Syndicate".
The investor also spoke about the possible consequences exit of Britain from the EU and in relation to Friday’s vote, his opinion does not require many interpretations.
Credit Suisse expects to Britain a period of recession in the second half of 2016, significant interventions by the Bank of England and a generalized economic slowdown eurozone.
The bank expects this scenario as a result of the success of Brexit in the referendum, calling it in a statement "is the most significant withdrawal from the need for integration since the Second World War. While the current output path is not yet clear, however, there are profound implications for Britain. we expect a recession in the second half of the year and monetary interventions by the Bank of England ".
We were cautious in our diversified portfolios with a reduced exposure to equities and high yield bonds. We held significant amounts of cash (over 10% on average) to stay flexible and be able to act quickly. We sold our UK exposure and hedged the GBP currency in order to preserve investors’ capital. We also hedged part of our peripheral exposure by selling futures contracts on Italian debt.
The markets had been anticipating a “remain” victory and the surprise effect should even amplify the impact on financial markets. The immediate effect should be extreme volatility with market dislocations due to margin call, panic selling and the search for safe haven.
The UK are to enter into a two year procedure with the EU, to negotiate the exit terms. The EU will probably not make it easy in order to discourage other leavers, which promise to keep uncertainty and volatility fairly elevated at least for the next months.
The European Central Bank (ECB) will accept again the government bonds of Greece to junk status as collateral in refinancing operations. The decision to reopen a source of funding, remained closed for 16 months, should help restore confidence in the greek banking sector and, according to several economists and bankers, could lead to a partial removal of capital controls in the coming days.
Eurozone growth slips to lows recorded in the last 18 months. The figure emerges from the report produced by Markit, the global provider of financial information services, which emphasizes that the Flash Eurozone PMI Composite index of production stops at 52, 8 points against the 53.1 recorded in May.
The value is the minimum for 17 months now. The PMI flash estimate of Eurozone Tertiary activity is estimated in June to 52.4 points against 53.3 in May, a minimum of 18 months.
