Sixteen observations, many of which are serious

1) When Mystic Meg said a large blond man would take England out of Europe, she wasn't kidding.

2) That BoJo was a no-show for the Prime Minister's speech (and questions afterwards) doesn't exactly augur well for a speedy resolution to the governmental interregnum, the implications of which the market has started to realize.

3) Macro Man can neither confirm nor deny the rumour that Roy Hodgson resigned so swiftly so that he could immediately be appointed to the negotiating team with the EU.  After all, who else could manage to take England out of Europe so quietly?

4) Mr. Hodgson was the highest paid manager in the tournament.  The Icelandic manager is a part-time dentist.  (Readers can supply their own jokes here about why this may have confounded the English.)

5)  Ironically, Iceland has almost exactly the same population as the city of Leicester.

6) While the downgrade to the UK's sovereign rating is clearly a blow to national pride, it needn't have any particularly nefarious implications.  After all, Treasuries have done just fine after the US downgrade, and 10y Gilts are trading at a record low yield:

7) That being said, the capital gains earned from owning Gilts must be small comfort to FX reserve managers who've seen the USD value of those bonds tumble.

8)  On the face of it, the FTSE 100 actually hasn't done too badly since the Brexit vote.  However, a decent slug of FTSE market cap is tied up in miners and resource companies with USD receivables- who thus benefit from the shellacking endured by sterling.  Looking at the domestically-focused midcap FTSE 250 tells rather a different story, however.   Macro Man plotted the relative performance of the FTSE 250 vs the FTSE 100, and compared it with the performance of the Russell 2000 vs the SPX as a "control" measure.

As you can see, the FTSE 250 was a star performer last year, an in-line performer for most of this year...and been absolutely crushed over the last couple of days.  That is the equity market impact of the Brexit (and associated uncertainty) manifesting itself.

9) Despite another 180 bp downdraft in the SPX, taking it to its lowest level since mid-March, the VIX fell sharply yesterday, dropping nearly 2 vols.

10) Macro Man isn't sure why this was, but the observation encouraged him to cover a portion of his longstanding short SPX position near the lows yesterday.  At some point soon, he expects a bounce that he'll be able to sell back into.

11)  While the DXY is looking very perky, gold is also trading well.   This of course is symptomatic of risk aversion flows, which can also be observed in the ongoing outperformance of the yen.  It's looking increasingly like the DXY is forming a base from which to strengthen  further.  A few weeks ago one might have thought it would be Fed rate hikes that would spur this; now, of course, it looks like risk aversion.

12) GDX, meanwhile, continues to trade like a rock star, outperforming bullion on the way up (much as it fell further than bullion on the way down.)  That being said, it should likely pause for a bit as previous highs from a couple of years come into play.   In the bigger picture, however, it is difficult to argue against continued strong performance, given the proliferation of negative yielding financial "assets" at the moment.

13) Remember this post about GDX and VRX?  Guess it wasn't time to buy the latter when their prices crossed.   How bad has Valeant been?   Its share price is even down in sterling terms this month.  In SAT logic terms, Valeant : Herbalife:: England team : EU.

14) We're coming close to a single-digit death watch for Deutsche Bank, aren't we, of the type we haven't seen for nearly eight years.  perhaps they can enter a race to the bottom with Valeant, though only one of them would have systemic consequences. 

15) Did you ever think you'd hear so little about USD/CNH pushing towards the highs, or the uptick in the USD/CNY fixing (up 114 bps in two days)?  The PBOC must be loving this Brexit stuff, as they can execute their game plan (the CFETS basket nudged very very slightly lower last night) with no scrutiny (other than that from slightly-obsessed bloggers, apparently.)

16)  Finally, this brief clip of former England manager Steve McClaren is amusing even with the sound off; his facial expressions apply to watching either an England match or the post-Brexit fallout.

I can’t stop laughing. Thank you Steve McClaren for this beautiful moment on TV. pic.twitter.com/MRIpWakDKa

— Liam Canning (@OffsideLiam) June 27, 2016