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“Central banks around the world are having more and more influence on the markets. Many people are trading off of anticipated policy moves and the crowded trades are even more profound. However, the sentiment of investors making bets on the “great divergence” has reached a fever pitch.  Fed funds futures are expecting at 78% of a 25bps rate hike, far too many people are on one side of the boat.  We believe credit risk will veto the Fed policy path next year.  We do not see rate hikes coming in 2016. We implore you to buy the gold miners GDX and long U.S. Treasury bonds.”

The Bear Traps Report, December 9, 2015

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The plunging in financial markets continued Monday.

The pound extending its record one-day selloff after the U.K.’s vote to exit the European Union threw British politics into turmoil, fueling anxiety over the decision’s impact on the wider global economy.

– Wall St has gone from entirely Yen bears to Bulls: Yen Brexit Surge Seen Testing 95 in Threat to BOJ Stimulus Goals.
– Brexit vote was like a ‘Black Swan event,’ PineBridge
– In panic mode, HSBC changes their year-end dollar-yen target to 95 from 115, Goldman had a 125 dollar yen target in December, she touched 100 on Friday.

 

Bank of Japan sets emergency meeting tonight.

Hillary Clinton, speaking in Indianopolis at Conference of Mayors, said U.S. will also recover “from all the other shocks that are in the system” after saying Americans lost about $100b from their 401ks following the U.K.’s Brexit vote.

Front Month VIX Futures surged up to 22.50 while 8 months out stand at 22.67, the curve is nearly inverted, a classic sign of severe panic.

S&P Futures

The rout in riskier assets picked up where it left off Friday, with the Australian dollar slipping with the euro as as U.S. and Japanese index futures fell with New Zealand shares. The Norwegian krone tumbled more than 2 percent as oil dropped a second day. Sterling sank beyond $1.35, extending losses near weakest level since 1985 as investors face months of uncertainty over Britain’s future amid turmoil within the two major political parties and Scotland agitating anew for independence. Angst boosted the yen and gold, amid demand for havens following the worst day for global stocks in almost five years.

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