Wednesday June 29 Daily Market Primer

Stocks recovered in the US Tuesday and around the world for the second day on Wednesday, as markets adjust to the new reality of Brexit.  Oil moved up and US bond yields rose slightly.  The pound rose for a second day and is now 2.2% off the bottom, with a long way to go to get back to pre-Brexit values.  US equity futures are pointing to a strong opening of up .8%

ECB President Mario Draghi gave a speech to the EU leadership saying he expects Brexit to cut Eurozone growth by .5% per year for three years http://bit.ly/DraghiEuroZone.  French President Francois Hollande called for an end to clearing Euro denominated trades in the UK, which would be a blow to London and the UK economy.    UK PM David Cameron asked EU leadership for flexibility of “freedom of movement” and did not get it, and likewise did not yield to pressure to execute Article 50 of the Lisbon treaty and begin the EU withdrawal process right away.

	LAST	CHANGE	% CHG
DJIA	17409.72	269.48	1.57%
Nasdaq	4691.87	97.42	2.12%
S&P 500	2036.09	35.55	1.78%
Russell 2000	1107.3	17.65	1.62%
Global Dow	2260.54	28.91	1.30%
Japan: Nikkei 225	15566.83	243.69	1.59%
Stoxx Europe 600	323.53	6.83	2.16%
UK: FTSE 100	6271.85	131.46	2.14%
CBOE Volatility	17.65	-1.1	-5.87%
DJ Asia-Pacific TSM	1352.08	21.9	1.65%
Australia: S&P/ASX 200	5142.4	39.1	0.77%
China: Shanghai Composite	2931.59	19.03	0.65%
Hong Kong: Hang Seng	20436.12	263.66	1.31%
India: S&P BSE Sensex	26740.39	215.84	0.81%
France: CAC 40	4183.08	94.23	2.30%
Germany: DAX	9585.84	138.56	1.47%
Italy: FTSE MIB	15836.83	235.21	1.51%
Spain: IBEX 35	8057.3	222.3	2.84%
U.S. 3 Month	0.264	0/32
U.S. 2 Year	0.629	-1/32
U.S. 5 Year	1.025	-2/32
U.S. 10 Year	1.474	-2/32
U.S. 30 Year	2.265	6/32
Crude Oil	48.36	6/32	1.07%
Brent Crude	49.7	0.44	0.89%
Natural Gas	2.969	0.079	2.73%
Reuters-Jefferies CRB	192.991	1.446	0.75%
S&P GSCI	375.07	2.97	0.80%
E-mini S&P 500	2044.5	16	0.79%

Donald Trump gave a speech outlining a protectionist presidency that according to the WSJ repudiates decades of Republican trade policy http://bit.ly/TrumpsTrade.   The 800 page GOP report on Benghazi which took two years to write did not give the Trump campaign any additional ammo against Hillary Clinton, spreading the blame broadly to the CIA and the US government.   Islamic State hit Istanbul airport with a very severe terrorist attach that killed 40 and injured hundreds more, contributing to the instability of the region.  Dallas based pipeline operator Energy Transfer Equity is spiking its $33 billion takeover of Williams Companies, siting “failure of merger conditions”. 

Here’s the news:

Brexit political fallout

British Prime Minister David Cameron attended what promises to be his last meeting of the leaders of all 28 European Union member states yesterday. German Chancellor Angela Merkel said afterwards that she sees no way back from Brexit for the U.K., while French President Francois Hollande warned of the threat to London's financial market following an exit. In Britain, survey data show that economists are divided on whether the country will fall into a recession in 2016 or 2017.

Markets rally

The MSCI Asia Pacific Index advanced 1.8 percent overnight as the global stock rally continues and volatility falls. In Europe the Stoxx 600 Index was 2.1 percent higher at 5:55 a.m. ET while in London the FTSE 100 was 2.2 percent higher — in local currency. The pound climbed 0.5 percent to $1.3400. S&P futures were 0.7 percent higher.

Bond rally continues

This morning Ireland became the latest country to set a new all-time record low 10-year bond yield when it dropped to 0.613 percent. In Japan, negative yields on government bonds seem to have become self-reinforcing, which could soon see every maturity of the country's debt yielding below zero. Treasuries are heading for their biggest rally since 2011, which has economists warning that the gains can't continue into next year. There was some good news in the corporate-debt market this morning too as Molson Coors Brewing Co. is selling euro-denominated bonds, the first offering in Europe since the Brexit referendum.

Turkey attack

Islamic State is being blamed for coordinated suicide attacks at Istanbul's international airport that left at least 40 people dead — 13 of them said to be foreign nationals. Turkey’s Borsa Istanbul 100 Index was 0.2 percent lower at 6:00 a.m. ET with airline stocks hit hardest. The attacks are a further blow to President Recep Tayyip Erdogan who has moved to heal rifts with Israel and Russia in recent days in a bid to boost the economy.

Fed rate rise a long way off

'One and done' seems to be the tale of the current Fed hike cycle. Money market derivatives now point to the next rate rise not coming until Jan 31, 2018. Federal Reserve Governor Jerome Powell warned yesterday that global risks have shifted further to the downside since the U.K. voted to leave the European Union. The shift in Fed expectations can be clearly seen in the fact that money markets are now pricing in a greater chance of a cut, rather than a hike, for the rest of this year.

Target Turkey
Suicide bombers struck Turkey’s busiest airport on Tuesday, killing at least 41 people and injuring scores more in the deadliest of a string of attacks in Istanbul this year. Three bomb blasts shook the arrivals area of the international terminal at Istanbul Atatürk Airport at around 9:22 p.m. One assailant set off a bomb after being shot by police near a checkpoint just inside the terminal, and two other attackers blew themselves up outside—one near the entrance and one in a parking lot across the street, according to a Turkish official. No group had claimed responsibility hours after the attack. However, Prime Minister Binali Yildirim said initial findings of an investigation suggested Islamic State carried out the assault. Passengers and workers at the airport described the chaos after the attack.

With or Without You
British Prime Minister David Cameron began the knotty process of extricating his country from the European Union on Tuesday at his last summit with leaders of the other 27 member states, who told him there would be no special deals for ex-members. He urged the EU to be flexible on the treaty rule that grants EU citizens the right to live and work in other member countries if it wanted to maintain close economic ties with the U.K., but European leaders spurned that call—at least for now. The race to replace Mr. Cameron is under way, with the front-runners widely seen as Boris Johnson, former mayor of London, and Theresa May, the home secretary. Meanwhile, Wall Street is tallying up the winners and losers after the wild market reaction to last week’s vote. One theme has emerged early—the computers got it right and the humans got it wrong.

Trading Places
Donald Trump offered a starkly protectionist view on trade in an unusually detailed speech on Tuesday, pledging to scrap the current North American Free Trade Agreement, kill America’s involvement in the Trans-Pacific Partnership and label China a currency manipulator. The presumptive Republican nominee’s trade proposals amount to a wholesale rejection of longstanding Republican orthodoxy and leave the party with a candidate arguing against the very policies that most GOP leaders have enacted and supported. Mr. Trump’s speech put him closer ideologically to recent Democratic presidential candidates than to Republicans, and drew condemnation from both Democrats allied with Hillary Clinton and Republicans who have long sought to boost U.S. trade. Meanwhile, Mrs. Clinton promised to democratize technology, including the goal to connect every U.S. home to high-speed internet.

Britain probably won't leave the EU until 2019. Citi says Article 50 — the mechanism under the Lisbon Treaty in which a country tells the European Union it is leaving the bloc and thereby gives a two-year notice period — isn't likely to be triggered anytime soon. The bank believes the ruling Conservative Party will first find a new prime minister, and then political conferences are likely to be held before a potential general election. After all that happens, the new government could trigger Article 50 upon entering office, Citi says.
Mario Draghi says Brexit could reduce eurozone GDP. Speaking in front of EU leaders on Tuesday, European Central Bank head Mario Draghi said the British exit from the EU, or Brexit, could shave 0.3 to 0.5 percent off eurozone growth over the next three years. Reuters reports, citing an EU official, that Draghi said the slowdown in growth was likely to come from a softening in the British economy and a slump in UK trade. Additionally, Draghi reportedly told leaders lower stock prices could lead to a higher cost of capital, which could weigh on growth.
The British pound is higher. The pound continues to claw its way back after its steep slide in response to the Brexit. Sterling dropped about 11% from its high on Thursday into Monday's trade. Wednesday's 0.5% gain has the pound up to 1.3410, 2.2% off its recent low.
A huge energy deal is being terminated. Energy Transfer has terminated its $33 billion merger with Williams because of a "failure of conditions under the merger agreement." According to Bloomberg, Energy Transfer was able to back out of the deal after it was discovered that a combination wouldn't free investors from their tax liabilities. Williams shareholders approved the deal Monday and are appealing.
Nike's futures sales disappointed. The athletic-apparel giant reported adjusted earnings per share of $0.49, beating the Bloomberg consensus by a penny. Revenue rose 6% to $8.2 billion but was a bit shy of the $8.28 billion that was expected. The closely followed worldwide futures orders jumped 11%, missing the 13% increase that analysts were anticipating. Shares of Nike were down by as much as 6% in after-hours trade.
Sony cut its 2017 revenue target. The electronics company lowered its fiscal-year 2017 revenue target to a range of 1 trillion to 1.05 trillion yen ($9.76 billion to $10.25 billion) for the year starting April 2017, citing slowing global demand for smartphones. The new target is down from Sony's estimate of 1.3 trillion to 1.5 trillion yen.
Global Markets Steady After Brexit-Related Rout
Fidelity Just Made Buying an Index Fund Vanguard-Cheap
Fed "stress tests" results are coming. Last week, the first part of the Fed's stress tests were released, showing that all of the big banks met their capital requirements. At 4:30 p.m. ET, the second-round results of the tests will be released. The results will show whether the banks can proceed with their plans to return capital to shareholders through dividends or buybacks.
Global markets continue to rally. Spain's IBEX (+3%) leads the gains in Europe after Japan's Nikkei (+1.6%) paced the advance in Asia. S&P 500 futures are up 12.75 points at 2,041.25.
Earnings reports trickle out. General Mills and Monsanto report ahead of the opening bell.

US economic data picks up. Personal income and spending will be released at 8:30 a.m. ET, and pending home sales will be announced at 10 a.m. ET. Then, at 10:30 a.m. ET, US crude-oil inventories are due out. The US 10-year yield is down 1 basis point at 1.46%.

$291M flows into BlackRock's high-yield bond ETF

BlackRock's high-yield bond exchange-traded fund brought in $291 million Friday, capitalizing on investors' thirst for yield after the UK decided to leave the EU.

Bloomberg (28 Jun.) 

France's Hollande calls for London to stop euro clearing

Euro-denominated trades must no longer be cleared in London, French President Francois Hollande says. The call had been expected, given Britain's decision to leave the EU.

Bloomberg (29 Jun.),  Financial Times (tiered subscription model) (29 Jun.) 

Victims of Brexit's real-time recession already feeling the pain.

Bitter Scotland weighs its own divorce.

Benghazi report has no major revelations about Clinton's role.

European banks spend billions to get U.S. units fit for the Fed.

Hong Kong’s richest man isn’t worried about the survival of his $80 billion empire. 

Lehman Brothers said to sell one of its last property holdings.

Pro-‘Brexit’ city of Sunderland glad to poke establishment in the eye.

If there's one strategy that's worked well for U.S. investors since the financial crisis, it's "buy the dip." Every time it's appeared as though this big bull market will come to an end, stocks have ended up defying those predictions. With markets around the world plunging in the immediate aftermath of last Thursday's referendum, the question obviously arises of when the strategy will stop working. In an interview yesterday on BloombergTV, BlackRock Inc.'s head of asset allocation Russ Koesterich expressed skepticism about whether investors will continue have it so easy. He argued that "buy the dip" has worked because each time there's been a downturn, there's been a policy response from a major central bank. But that dynamic could change if people perceive central bank stimulus as losing its efficacy. "If we're going to see stocks move higher, it has to be on the basis of better fundamentals, which have to come from a better global economy," he said. Of course, there are more important things in the world than coming up with policies that make investors happy... There's the broader issue of why voters appear to be turning against consensus political and economic views. In a conversation with BloombergTV yesterday, Mohamed El-Erian, chief economic adviser at Allianz SE, said the good news is that there's a growing recognition of the need for a new "inclusive" growth model in the developed world that doesn't leave so many behind. The bad news: He doesn't see the Brexit vote as being a big enough catalyst to get the political class to try a new approach. It's going to take something more dramatic.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Reuters

Friday June 24 Daily Market Primer Brexit Edition

It was a day for the history books Thursday as the UK voted with their feat to leave the European Union.  The Brexit vote reminds us of the inherent unpredictability of political events, economics, and markets,  when even in as closely watched an event as this one, the polls, pundits, and odds makers all got it wrong.

Markets rallied in the US yesterday, but it doesn’t matter as the US gains were quickly overtaken by events triggered by the surprise UK vote to leave the European Union.  Global risk markets had a priced in a remain win as probabilities in the polls and the UK betting sites had converged over the last few days.  The first to go was the pound, which fell 10% against the dollar and started to drop the minute “leave” edged ahead in the count.   Asian equities were trading and fell about 3%, and European and US stock futures let go as investors sold stocks and bought treasuries and yen.  Japanese, French, Italian, Spanish, and German stocks got hit the hardest, down 7 to 12%.  Ironically the FTSE 100 is only down 4%.  The US 10 year yield is back down to 1.53% and the VIX jumped 40%.  US stock futures are pointing to -3.5% opening, or down about 80 S&P points (E-Mini S&P500, below).   Note that this is an improvement from when I went to bed last night, when the S&P futures were down 105 points.

British PM David Cameron, the architect of the referendum, resigned and will step down as the leader of the Tory (Conservative) party and will leave office by October.  So we can add another important election to the summer election season.  Central banks are promising to make liquidity available to ease market stress as necessary.

	LAST	CHANGE	% CHG
DJIA	18011.07	230.24	1.29%
Nasdaq	4910.04	76.72	1.59%
S&P 500	2113.32	27.87	1.34%
Russell 2000	1172.22	23.25	2.02%
Global Dow	2294.54	-88.81	-3.73%
Japan: Nikkei 225	14952.02	-1286.33	-7.92%
Stoxx Europe 600	320.79	-25.55	-7.38%
UK: FTSE 100	6070.23	-267.87	-4.23%
CBOE Volatility	24.14	6.89	39.94%
Australia: S&P/ASX 200	5113.2	-167.5	-3.17%
China: Shanghai Composite	2854.29	-37.67	-1.30%
Hong Kong: Hang Seng	20259.13	-609.21	-2.92%
India: S&P BSE Sensex	26397.71	-604.51	-2.24%
France: CAC 40	4077.7	-388.2	-8.69%
Germany: DAX	9516.22	-740.81	-7.22%
Italy: FTSE MIB	15992.04	-1974.13	-10.99%
Spain: IBEX 35	7760.2	-1125.1	-12.39%
U.S. 3 Month	0.248	-1/32
U.S. 2 Year	0.609	10/32
U.S. 5 Year	1.029	1 3/32
U.S. 10 Year	1.536	1 29/32
U.S. 30 Year	2.393	3.8/32
Germany 2 Year	-0.641	6/32
Germany 10 Year	-0.075	1 22/32
Italy 2 Year	0.058	-5/32
Italy 10 Year	1.471	1 19/32
Japan 2 Year	-0.281	3/32
Japan 10 Year	-0.196	19/32
Spain 2 Year	0.046	-3/32
Spain 10 Year	1.619	-1 11/32
U.K. 2 Year	0.273	17/32
U.K. 10 Year	1.072	2 23/32
Crude Oil	47.82	-2.29	-4.57%
Brent Crude	49.1	-2.51	-4.86%
Natural Gas	2.721	-0.023	-0.84%
Gasoline	1.5447	-0.0669	-4.15%
Gold	1328.8	65.7	5.20%
Silver	18.005	0.595	3.42%
Corn	379.25	-13.25	-3.38%
Wheat	458.8	-7	-1.50%
E-mini DJIA	17407	-508	-2.84%
E-mini S&P 500	2032.5	-73.25	-3.48%
Reuters-Jefferies CRB	188.974	-4.551	-2.35%
S&P GSCI	369.33	-11.38	-2.96%
Euro (EUR/USD)	1.1074	-0.0311	-2.73%
Yen (USD/JPY)	102.5	-3.65	-3.44%
Australia $ (AUD/USD)	0.7431	-0.0183	-2.40%
Canada $ (USD/CAD)	1.3002	0.0236	1.85%
Euro/Yen (EUR/JPY)	113.49	-7.35	-6.08%
Euro/Swiss Franc (EUR/CHF)	1.0811	-0.0104	-0.95%
Mexico Peso (USD/MXN)	18.8494	0.6197	3.40%
New Zealand $ (NZD/USD)	0.7114	-0.0137	-1.89%
Pound (GBP/USD)	1.3723	-0.1151	-7.74%
Pound/Euro (GBP/EUR)	1.2393	-0.0671	-5.14%
Swedish Krona (USD/SEK)	8.5255	0.3629	4.45%
Swiss Franc (USD/CHF)	0.9761	0.0176	1.84%
Chinese Yuan (USD/CNY)	6.6247	0.0443	0.67%
WSJ Dollar Index	86.78	1.63	1.92%

British PM David Cameron, the architect of the referendum, resigned and will step down as the leader of the Tory (Conservative) party and will leave office by October.  So we can add another important election to the summer election season.

Here are Jim McDonald’s morning comments:

Asset allocation thoughts:

·         The overnight vote results showing a win by the "Leave" campaign are a major surprise to the markets and are roiling asset prices. The surprise is exacerbated by the momentum the "Remain" campaign seemed to be showing in the week before the vote. In fact, today's significant sell-off is more than erasing the gains made since mid-June.

·         The economic and investment implications of Britain's vote are complex and in many ways still to be determined. We will be assessing these implications in coming days and weeks, and most importantly, comparing them with price developments in asset markets.  A move from our moderate overweight to risk assets will be justified if we feel asset prices have materially mispriced the fundamental outlook over the next twelve-eighteen months.  On a short-term basis, we wouldn't be selling into the weakness as European stocks are already down more than 7% today and the relative safe-haven US market is indicated down nearly 4%. 

·         The direct economic impact of the U.K. Leaving the EU is likely not material to the global economy. The greater risk comes from the potential tightening of financial conditions and discounting if further EU fracturing. As we advance our thinking on these developments in coming days and weeks, we promptly communicate those thoughts.  

As we talk to clients today, be confident and reassuring.   This is not a Lehman moment.  Here are a few important points to emphasize:

·         We have managed portfolios through volatile times before, recently including 2008, last summer, and January and February of this year.  This is familiar territory for us and we know what to do.

·         We avoid making asset allocation changes during times of market stress.  Markets can reverse quickly and unpredictably.  If changes to portfolios are warranted, Northern’s Investment Policy Committee will recommend changes in a measured, considered way as we have more information and clarity.

·         Volatility and “unexpected” events are expected, are part of the natural cyclicality of markets, and happen fairly regularly.

·         We have taken measures to provide Bond Runways for many clients to provide comfort in exactly these types of markets.  Many of our clients have excess sufficiency and long time frames.   Clients with allocations to private assets have shielded part of their portfolios from this volatility.

Please quickly escalate any difficult client situations to your SIO’s, MDs, or to me.

The US market opens in 15 minutes.  Here’s the news:

Brexit wins out

After months of waiting, now the real uncertainty begins. The U.K.'s decided it wants to leave the European Union and with no clear blueprint for that process, volatility ruled. The pound swung from its highest to its lowest level in six months during the vote count before weakening to as low as 1.32 dollars as it became clear that Brexit had edged it, in defiance of both the polls and Prime Minister David Cameron, who announced he is stepping down in the wake of the vote. The FTSE 100 fell 8.7 percent at the open, yet on account of exchange rate effects/currency weakness it still managed to be the day’s best performing of the largest EU equity benchmarks, as of 6 a.m. in New York.

Historic Exit
Britons voted to leave the European Union in a startling rebuke that rattled financial markets and threatens to spark political turmoil in the U.K. and weaken a continent already strained by multiple crises. With all voting areas counted, Leave beat Remain 51.9% to 48.1% early Friday, severing the U.K.’s ties with the EU after 43 years. The vote instantly reshaped the political legacy of U.K. Prime Minister David Cameron, who led the “Remain” effort and said this morning he will resign. Boris Johnson, the former London mayor who campaigned for “Brexit,” scored a major victory. He hailed the result as a “glorious opportunity” for a fresh start for Britain in the world and said the EU had outlived its historic mission. He is now a leading candidate to succeed Mr. Cameron. The market moves as the result emerged were enormous. Sterling went from a high for the year to its lowest level since 1985. It was a brutal drubbing for investors who had stacked up bets that the U.K. would choose to stay. Nothing was spared from the tumult.

Central banks at the ready

Liquidity will be provided as needed, was the mantra of central bankers reacting to the vote — and some have already leapt into action. The Swiss National Bank intervened to stabilize the franc, while the Bank of Japan stated its readiness to act to hold down the yen, which appreciated below 100 to the dollar for the first time in over a year. BOE Governor Mark Carney said he's ready to pump 250 billion pounds ($345 billion) into the financial system, as bets on a July interest rate cut climb to 50 percent. The European Central Bank also said it's prepared to provide liquidity as the bloc's currency dropped, by 5.30 a.m. New York time, to 1.11 against the dollar.

Flight to havens

The yen was the only G10 currency to strengthen against the U.S. dollar as of 4.46 a.m. ET, rising 3.12 percent as investors fled riskier assets. Amid a stampede to safer assets gold posted its biggest one-day gain since the global financial crisis of 2008 and U.S. Treasuries surged, with benchmark yields falling by as many as 34 basis points, their biggest drop in seven years. Brent crude futures slumped as much as 6.6 percent, as bets of a global recession picked up.

What Brexit means for the Fed

As for the Federal Reserve — all that talk of a June rate hike now seems very far away. "I’m overwhelmed with client questions about the impact on the U.S .and the Fed," wrote Deutsche Bank AG economist Torsten Slok in a note to clients. UBS withdrew its forecast for a 25 basis point hike in September, however it still sees a hike in December.

Who's Nexit?

Euroskeptic politicians across the continent have already seized the chance to demand their own referendums, in the U.K.'s mold. With Spain holding elections this Sunday and a debate on constitutional reform approaching in Italy fast approaching, there are ample opportunities for the secessionist bug to pick up steam. Most notably, Scotland's First Minister Nicola Sturgeon said she will explore all options to secure Scotland's membership in the EU, including a possible second referendum on Scottish independence. 

David Cameron is resigning. "I will do everything I can as prime minister to steady the ship over the coming weeks and months, but I do not think it would be right for me to try to be the captain that steers our country to its next destination," Cameron said in an emotional speech outside 10 Downing Street. The prime minister promised the referendum back in 2013, backing the Remain campaign. "In my view we should aim to have a new prime minister in place by the start of the Conservative Party conference in October," Cameron said.
Global markets are in shambles. US futures are sharply lower, with S&P 500 futures down 74 points (3.53%) and Dow futures down 497 points (2.79%). Stocks rallied into the market close on Thursday as traders bet that Britain would vote to stay. European stocks are also in chaos: the FTSE 100 is down 4.9%, and the Euro Stoxx is down 8.4% to its lowest level since February. Japan's Nikkei tanked 7.9%, also to a February low. The flight from stocks is pumping Treasurys and gold. Gold is up 4.5%, or $57 an ounce, to $1,320.10, a two-year high. The yield on the 10-year Treasury note is down 22 basis points to 1.512%, not far from a record low.
The pound had its worst crash ever. The British currency had its biggest one-day drop on record, plunging more than 11.0% to a low as 1.3239 per dollar — a 30-year low. "Britain's shock vote to leave the EU has unleashed a wave of economic and political uncertainty that likely will drive the UK into recession," Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said in a note.
European central banks are stepping in. Bank of England Governor Mark Carney said the central bank could pump up to £250 billion ($345 billion) into the financial system to steer the economy through a "period of uncertainty and adjustment." He added that this could be accompanied by more volatility. The Swiss National Bank said it intervened in the foreign-exchange market and would remain active after the franc soared against the euro. Federal Reserve Chair Janet Yellen said in congressional testimony earlier this week that a Brexit vote could have "significant repercussions."
Donald Trump says Britons took their country back. The Republican presidential frontrunner, who is in Scotland to open a golf resort, said "they're angry over borders, they're angry over people coming into the country and taking over and nobody even knows who they are," according to the BBC. Analysts are opining on what this means for the US election in November. "If Britain can vote itself out of Europe, America can vote itself in for Trump," veteran Republican pollster Frank Luntz told Business Insider.
JPMorgan may rejig its European operation. In a memo to employees, CEO Jamie Dimon said "we may need to make changes to our European legal entity structure and the location of some roles." The bank plans to retain a "large presence" in Britain, Dimon said. Three weeks ago, Dimon said in a speech that JPMorgan could move an undisclosed number of its 16,000 UK-based workers to Europe if Britain votes for a Brexit.
The 33 biggest banks aced their stress tests. Results of the Federal Reserve's latest tests showed Thursday that the banks had sufficiently boosted their protections against a sharp economic downturn. The tests, conducted since 2009 and mandated by the Dodd-Frank Act since 2011, attempt to determine the safety of financial institutions with more than $50 billion in US-based assets.
Twilio surged 92% in its market debut. Twilio, which provides phone and messaging support services, priced at $15 a share and ended Thursday at $28.79, a 91.9% jump. It was this year's third and biggest initial public offering in tech.
In US economic data, May durable goods orders will be released at 8:30 a.m. ET. And the University of Michigan's preliminary consumer sentiment report for June is due at 10 a.m. ET.

New World Order
The U.K. and the EU now must navigate an unprecedented separation while trying to prevent political and economic dislocation. The vote isn’t legally binding, so Parliament must pass laws to make Britain’s exit a reality. For leaders in the EU, the vote raises fears of further disintegration and raises hopes for nationalist politicians in the Netherlands, France and elsewhere will likely seek to follow. European businesses must adjust to a new landscape, while the result is also expected to jolt the U.S. economy, likely rattling restive equity markets and driving up the value of the dollar and pushing down already low bond yields. The vote battered the pound, pushed down stocks in Asia and points to a day of turbulence across the world’s financial markets.

Split Court
A deadlocked Supreme Court on Thursday killed President Barack Obama’s plan to defer deportation and provide work authorization for millions of illegal immigrants, pushing the issue to the forefront of the 2016 election. Although the high court’s 4-4 vote established no new precedent, it effectively put an end in effect to Mr. Obama’s effort to extend his executive authority over immigration to the outer limit. The one-sentence ruling was the latest defeat for Mr. Obama in the courts, which recently have stymied some of his administration’s top policy goals. The outcome doesn’t require the administration to begin deportations of the affected immigrants, but it does halt the government’s plan to normalize their presence by granting them authorization to work. Also yesterday, a divided court upheld racial preferences in public-university admissions,

Hacked blockchain user launches $50M debate

Venture capital fund Decentralized Autonomous Organization has been hacked, with $50 million stolen, prompting debate on whether to tweak Ethereum, the blockchain it uses. "The governing individuals that created Ethereum are in a tough situation: Either they change the Ethereum blockchain to reverse the theft from the DAO and deal with questions of immutability or allow thieves to get away with their crime for the sanctity of the young blockchain," said Wedbush Securities analyst Gil Luria.

Bloomberg (23 Jun.) 

Asset managers are braced for redemptions.

Here are five markets charts to watch in the aftermath of the Brexit vote.

When Carney says "additional measures" analysts hear rate cuts.

Nationalist parties across Europe feel emboldened.

How currency traders reacted to the vote.

HSBC says get ready for stagflation in the U.K.

U.S.-Backed Forces Enter Key Syrian City Held by Islamic State

U.S. Oil Companies Crank Up Production in Gulf of Mexico

Fed Stress Tests: All Big Banks Clear Bar for Capital Requirements

Turkey’s Rift With Moscow Frays Ties With Turkic Kin

There's so much to think about with regards to last night's Brexit vote and its implications, that it's hard to even know where to start. In the days ahead there will be a million takes about what it means for financial markets, globalization, politics, and much more. In the meantime, here are two very quick thoughts. The last time markets felt anything vaguely like this was in March 2011 in the immediate aftermath of the Japanese earthquake and the disaster at the Fukushima power plant. In the ensuing days, we saw major swings and stark air pockets as traders attempted to assess a chaotic, unknowable risk. As for the medium-term, one thing I'm interested in is whether the market turmoil we're seeing today accelerates similar "-xit" movements in other countries, or whether the U.K. will be seen as a cautionary tale. It's way too soon to know how all that evolves, but it's the crucial thing to watch.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief