Sunday, June 26, 2016

Nomura: "Do Not Underestimate 
The Global Contagion" From Brexit
"At first glance, it would seem that the financial and economic impact of this result should be largely confined to the UK, given that its economic size is quite small at less than 4% of world GDP and world imports in 2015. However, we believe that this is too simplistic of a view and that the impact of the Brexit will be far reaching and long lasting, for two main reasons. First, we expect non-trivial spillover to the euro area economy and financial markets .. Moreover, one should not underestimate the psychological impact and how quickly markets could link the outcome to a rising risk of Donald Trump winning the U.S. presidential election .. The UK referendum is part of a global phenomenon – the rise of nationalist sentiment and populist revolts against established political parties .. A globally coordinated central bank response to a global financial market meltdown is quite likely, such as liquidity support through FX swap arrangements and possible FX intervention, but with policy credibility at such a low it is unclear how successful these emergency measures will ultimately be when there is extreme market risk aversion."
LINK HERE to the analysis

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