- These “Brexit” Market Moves Were Bigger Than Anything Seen In 2008… And What Comes Next
by Tyler Durden, www.zerohedge.com
When the general population is asked to define a moment of paradigmatic instability in the history of financial markets, inevitably 2008 – in which there was a unprecedented divergence between risk perception and the ultimate reality which saw Lehman fail and lead to the near collapse of the financial system – is the most cited answer. However, on Friday various markets saw volatile moves that put 2008 in the dust: in fact, the historic collapse in GBPUSD was not only far greater than any such move seen in history, but was an unprecedented 12-sigma move.
As Bank of America notes, post Britain’s vote to Leave the EU, the Euro STOXX 50 experienced its largest ever 1-day loss, GBPUSD reached 30yr lows and EURJPY, EURUSD & 10yr Bunds experienced 1d moves that were more significant than on any day in 2008. Gaps in risk perception that were evident even as recently as last week (VSTOXX-VIX spread was as wide as 20pts), may narrow further as spillover risk to global assets remains high. Indeed the Critical Stress Indicator of BofAML’s GFSITM index triggered on 13-Jun, suggesting cross asset stresses had risen by enough to lead to widespread contagion, absent policy intervention.