Two more polls this morning point to "leave" extending its lead over "remain" and that sentiment is weighing on risk assets (and bond yields) across the world as contagion concersn spread. Bond yields continue to plunge (Germany new record lows and Swiss 30Y just went negative for the first time), EU banks are crashing (with CS and DB at new record lows) giving many a reason to think "what the hell is going on in Europe?" The Bank of England "indepedently" unleashed more scary words today warning that Brexit could crush employment, drag on the economy, and slam the pound, which HSBC notes offers asymmetric potential for gold (expecting at least 10% upside move in the precious metal if the Brits vote "leave" with limited downside).
First things first, the money outflows are esacalating from Europe…
The polls continue to trend towards Brexit…
- U.K. POLL ON EU SHOWS LEAVE 45%, REMAIN 42%: IG/SURVATION, Remain loses 2%, Leave gains 7%
- U.K. POLL ON EU SHOWS 47% REMAIN, 53% LEAVE: IPSOS-MORI
As Reuters reports, British support for leaving the European Union in a June 23 referendum has risen to 53 percent, a telephone poll showed on Thursday, the highest level of support recorded by the pollster for the "Leave" campaign in more than three years.
The survey by Ipsos Mori of 1,257 adults across Britain from June 11-14 showed 51 percent of all voters wanted to leave the bloc and 49 percent wanted to stay. But, when filtered for those likely to vote, the poll showed 53 percent would vote to leave and 47 to remain.
"With a week to go, Leave have outgunned Remain with a series of arguments on immigration and money that are often believed despite being flatly denied by the other side," Chief Executive Ben Page told Reuters.
"Polls don't predict but pollsters sometimes do: personally I think that as in Scotland the status quo may triumph at the last minute. But it looks very close," Page said.
It is the first time that the Out campaign has come out ahead in the monthly Ipsos MORI survey since Prime Minister David Cameron pledged in 2013 to hold a referendum, the pollster said.
It also marks a major turnaround since a May poll by Ipsos MORI, which found 37 percent wanted to leave against 55 percent who wanted to stay. When weighted for those likely to vote and excluding undecideds, the breakdown then was 60 percent for In and 40 percent for out, a spokeswoman for Ipsos Mori said.
And the concerns are spreading… as Bloomberg reports,
Europe’s largest banks slumped, with Deutsche Bank AG and Credit Suisse Group AG hitting fresh record lows, reflecting investors’ concern in European economic prospects after the Federal Reserve scaled back its interest-rate outlook, citing a potential Brexit among risks.
“The trajectory of European banks is really worrying,” said Lorne Baring, a fund manager who helps oversee $500 million at B Capital in Geneva. “If banks are a main indicator of the health of a region, it gives you another reason to think ‘what the hell is going on in Europe?”’
Deutsche Bank, Europe’s largest investment bank, dropped 2.5 percent to 12.96 euros at 12:32 p.m. in Frankfurt after hitting the lowest since at least 1992, when Bloomberg first started compiling data. Credit Suisse slumped as much as 5.3 percent, bringing losses this year to about 48 percent. The 39-member Bloomberg Europe Banks and Financial Services Index fell 1.4 percent, with Spanish and Italian banks among the worst performers.
"Credit Suisse and Deutsche Bank are very fragile, they’re in restructuring mode and have capital issues,” said Tomasz Grzelak, an analyst at Main First. “Income at investment banks is very sensitive to downward market movements. While equity markets fall, companies may not issue capital or use investment-banking services, which has an immediate impact on the revenues of the securities units.”
With Deutsche Bank looking ominous…
The Bank of England has "indepdently" come out with more dire warnings (via WSJ)…
A vote in favor of leaving the European Union in the U.K.’s referendum on membership next week could adversely affect the global economy, the Bank of England said Thursday, in its latest assessment of the potential consequences of a British exit from the 28-member bloc.
“The outcome of the referendum continues to be the largest immediate risk facing U.K. financial markets, and possibly global financial markets,” officials concluded this month, according to minutes of their discussions published Thursday.
“Through financial market and confidence channels, there are also risks of adverse spillovers to the global economy” if Britons vote in favor of a British exit, or “Brexit,” the BOE said.
Which HSBC sees as a major opportunity in Gold… (via Valuewalk)
“Gold is a reliable barometer of risk, and we believe it could rally by up to 10% should the UK vote to leave the EU,” that’s according to a flash research note from HSBC’s chief precious metals analyst James Steel sent to clients today.
According to the report, if the UK votes to leave the European Union on June 23, the price of gold could rally by 10% to around $1400 an ounce as investors look to the yellow metal to provide a safe haven in times of uncertainty. What’s more, gold could also benefit from the reluctance of investors to move into sterling or even the euro following a ‘leave’ vote.
HSBC goes on to point out that unlike CHF and JPY, gold is an ‘intervention free’ currency. Or to put it another way, the central banks of Switzerland and Japan could act to stem currency appreciation following a leave vote if inflows were great enough to pose a threat to domestic economies. Central banks do not exert the same kind of influence over gold. Actions to curb currency appreciation are likely to increase flows into gold.
“Gold is not linked or dependent on any monetary authority or economic policy and so is almost entirely intervention-risk free. If investors seriously thought further CHF or JPY appreciation could trigger currency intervention, then greater safe haven driven flows are likely to move into gold.” – HSBC June 23 flash research note.
On the other hand, if the UK votes to remain in the EU on June 23 HSBC’s commodities team sees little downside potential in the yellow metal:
“The risk to gold of a vote to remain in the EU would be asymmetric. While a vote to leave the EU would likely result in a rally, we do not think a vote to remain in the EU would trigger a major sell-off.”
“Since the beginning of June, the JPY, CHF, and gold have rallied, as the UK polls showed the leave camp gaining ground. In the event of the UK’s voting to remain in the EU, we may see a near-term reversal in the June gains, but this is unlikely to represent a decline of more than 5%.” – HSBC June 23 flash research note.
Outside factors such as speculation over the next Federal Reserve rate hike, the uneven pace of global expansion, the uncertainty associated with the US election and other geopolitical risks are more likely to influence gold’s price action throughout the rest of the year.
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It appears the need for non-fiat currencies is surging…
"Not" priced in!
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