Greetings,
We begin with some of the recent developments in the United Kingdom. Those who thought the situation would quickly normalize after the referendum are in for quite a surprise.
1. The British pound fell below 1.30 for the first time in over 30 years.
Source: @barchart
2. The unprecedented currency decline resulted in bifurcation of UK businesses – those who generate much of their revenue abroad and those who are domestically focused. The divergence between the FTSE 100 and the FTSE 250 is a good example of this dynamic.
Source:Â @fastFT
Source: Ycharts.com
3. The Bank of England made its first post-Brexit easing move by loosening capital requirements for banks.
Source:Â Business Finance News
4. The UK 10yr government bond yield dropped below 80bp – a record low.
5. The event that spooked the markets the most was a series of fund redemption freezes by some UK real estate income funds. These funds should not have allowed short-term liquidity to begin with, especially when many investors use them in lieu of money market funds. A total of about $12 billion of property assets is now frozen.
This event brought back memories of the Bear Stearns subprime funds.Â
  I. Standard Life UK property fund.
Source:Â BBC
Standard Life shares were hammered on the news.
Source: Google
  II. Aviva property fund.
Source:Â @FT
  III. M&G Property Portfolio.
Source: M&G
Source: M&G
6. Banks with significant UK property exposure saw their share price come under pressure. For example, Shawbrook Bank has decided to merge its commercial and secured lending divisions – an excellent way to bury the losses. That didn’t help the stock price.
Source: Google
7. UK REITs are also under pressure.
Source: Google
8. The UK construction sector started shrinking even before the referendum results, with the construction PMI coming in well below expectations.
Source: @tEconomics
9. The whole of UK service sector is expected to begin contracting. Take a look at the pre-brexit results below from Markit.
Source: @MarkitEconomics
10. The latest economic/business uncertainty measures show a sharp decline in confidence. Here are the indicators from Markit and YouGov.
