Europe

The Brexit is a negative event for the merit of Britain’s credit, Moody’s says. The decision to leave the EU will lead to a prolonged period of uncertainty that will weigh on the economic and financial center of Britain.

The increased uncertainty in negotiations on new agreements EU-UK will likely reduce the flow of investment and confidence of businesses and consumers in the UK. Moody’s adds that the lasting impact of the vote for the exit will depend on the nature of the new EU-Britain ties.

The first months of 2016 were a reminder that we are not only living in a world of low to negative interest rates. It was also a good reflection of uncertainties around global growth in general and a long list of looming event risks.

The volatility witnessed during the first months of the year and the whipsawing in the valuation of risk premia is not a 2016 phenomenon: equity indices for Europe, the US or Emerging Markets unveil that high volatility and significant market swings have been with us since at least late 2014.

"We recovered the country, this is a victory of the real people, the ordinary people, the dignified people." So Nigel Farage, leader of UKIP Independence Party Face and favorable exit of Britain from Europe, commented on the victory in the referendum on Brexit. And anticipating the next move, when reporters asked if the prime minister David Cameron should resign, he replied: "Immediately."

Nigel Farage said that the referendum on Brexit there was "the victory of the common people against the big banks, big business and big politicians."

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 US authorities have withdrawn a complaint against UBS that saw the bank forced to produce documents relating to certain bank accounts held at its Singapore branch, payable to an American citizen suspected of tax evasion.

Since the institute has found a preliminary agreement with the Internal Revenue Service, the US Justice withdrew the complaint, as announced tonight by the US Department of Justice.

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.