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A Quick Look At The Brexit Bounce

Takeaway: European equities popped following U.K. Finance minister George Osborne's Brexit assessment. The FTSE is still down -11% from its 2015 high.

A Quick Look At The Brexit Bounce - Brexit cartoon 06.07.2016 

 

Ah, the Brexit Bounce...

 

European equities popped this morning following U.K. Finance minister George Osborne's warning shot to Brexit voters. Osborne suggested that a "Leave" vote would force the U.K. to raise taxes and enact spending cuts worth 30 billion pounds ($43 billion) and proposed measures to fill an economic "black hole" from lower trade, investment, and tax receipts.

 

Essentially markets bet that Osborne's dire predictions raised the likelihood of a "stay" vote. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers this morning: 

 

"Big bear market slash Brexit bounce this morning as Osborne threatens tax hikes – levels matter here as yesterday was a big immediate-term oversold signal in almost every major European index. The FTSE is up +1.1% to 5,986 and would need to recapture 6,305 to not be bearish TREND however."

 

 

Take a look at the most recent Brexit tracker (an aggregation of various polls) via Bloomberg. At this point, polls are showing a coin flip vote:

 

Click image to enlarge. 

A Quick Look At The Brexit Bounce - brexit tracker 6 15

 

By way of contrast, we've laid out why we think there are Political, Financial, and Behavioral reasons why the balance is tipped toward a "Stay" vote on June 23, in "An Update On Brexit: Should I Stay Or Should I Go Now."

 

**In case you missed it, here's a good wrap of Osborne's proposed emergency public spending cuts and tax increases from the BBC and the opposition party's pushback.


Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets 6 15

 

Daily Market Data Dump: Wednesday - sector performance 6 15

 

Daily Market Data Dump: Wednesday - volume 6 15

 

Daily Market Data Dump: Wednesday - rates and spreads 6 15

 

Daily Market Data Dump: Wednesday - currencies 6 15


CHART OF THE DAY: Dear US Equity Beta Chasers, Here Are 3 Catalysts To Risk Manage

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.


"... That’s right muddlers – there has been a ton of alpha out there to be had. So let’s get with the program and do what we’re paid to do and get the next move right from here. For US Equity Beta chasers, I think the next move is Up, then Down. Potential catalysts:

 

  1. The Fed (going back to dovish today with Late Cycle #EmploymentSlowing)
  2. Brexit (if they don’t exit)
  3. Mean reversion and performance chasing"

 

CHART OF THE DAY: Dear US Equity Beta Chasers, Here Are 3 Catalysts To Risk Manage - 06.15.16 EL Chart


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Drake: Keep An Eye On (Decelerating) Income Growth

 

In this excerpt from The Macro Show earlier today, Hedgeye U.S. Macro analyst Christian Drake explains why income growth continues to slow and what it means for the U.S. economy.


Cartoon of the Day: An Update On Global Bond Yields

Cartoon of the Day: An Update On Global Bond Yields - Yield cartoon 06.14.2016

 

The yield on the 10-year German Bund hit an all-time low today falling into negative territory for the first time ever. Global sovereign bond yields continue to make new lows as #GrowthSlowing fears persist.


Credit Drought (Part 2): Trouble Ahead For The Ag Sector?

Takeaway: The agricultural economy hasn't bottomed and farmers are struggling to keep up with mounting debt.

Credit Drought (Part 2): Trouble Ahead For The Ag Sector? - farm storm

 

Is the agricultural economy troughing?

 

The answer is no.

 

As Hedgeye Commodities analyst Ben Ryan points out, the trends in the farm credit cycle are disconcerting to say the least. Below are four charts and brief analysis from Ryan as a follow-up to "Credit Drought: A Weary Road Ahead For The Ag Sector." (You can follow him on Twitter @Hedgeye_Comdty.)

 

As you may have guessed, all is not well on the farm.

#1

 

"According to the Kansas City Fed, more than 30% of financial institutions reported increasing collateral requirements for farmers in Q1."

 

Credit Drought (Part 2): Trouble Ahead For The Ag Sector? - kc fed 1

#2

 

"Bankers noted greater than 18% of loans made to farmers in Q1 involved restructuring existing debt to meet short-term liquidity needs."

 

Credit Drought (Part 2): Trouble Ahead For The Ag Sector? - kc fed 2

#3

 

"In Q1, farm real estate accounted for 22% of collateral on non-real estate loans greater than $250K, up from 13% two years ago."

 

Credit Drought (Part 2): Trouble Ahead For The Ag Sector? - kc fed 3

#4

 

"So according to Farmer Mac, every single Ag. related commodity is 'low.' I'd be begging for bottom too."

 

Credit Drought (Part 2): Trouble Ahead For The Ag Sector? - kc fed 4

Need more?

 

Here's a key takeaway from a recent Bloomberg story:

 

"The USDA has forecast farmer income will drop to $54.8 billion this year, the third straight decline and less than half of the record profit earned in 2013. The ratio of debt to income has more than doubled in three years to 6.8 percent, the highest since 1984, when the Midwest was mired in a farm crisis that saw the highest foreclosure rates since the Great Depression."

 


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