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By Tyler Durden

While by now practically every bank has forecast how the market would react to a Brexit vote, either to say or leave, nobody has quite come as close to dramatic forecast revealed by Morgan Stanley analysts overnight. The bank, which after the sharp move in the polls to Leave has now raised the probability of a vote to Leave to 45%, predicts that MSCI Europe would see a 15-20% drop in a base case BREXIT scenario. This compares to a 5-10% rally if the UK votes to remain in the EU.

Here are the two cases as summarized for the Stoxx 50 and FTSE 100, based on whether Remain or Leave wins:

STOXX 50

• Base case index target range under Leave is 2400-2550.
• Rally up to 3150-3300 under Remain.

FTSE100

• Base case index target range under Leave is 5000-5300.
• Rally up to 6500-6800 under Remain

Below we present the full MS bull, base and bear case scenarios in the event of Brexit.

PE and EPS assumptions for MSCI Europe

Scenario framework for MSCI Europe in event of BREXIT

PE framework. MSCI Europe’s N12M PE is 14x today and has averaged 15x over the last 3M. This compares to our expectation of a 5-10% rally if the UK votes to remain in the EU. The median reading since 1987 is 12.9.

• Base case: We assume a 15% drop in N12M PE which would imply a move down to 12.8 from its L3M average.
• Bear case: A 20-25% drop in the N12M PE would imply a move down to c. 12x – still materially above the single-digit lows seen during 2011/12.

EPS framework. Historically, European earnings have generally declined by 30-40% during recessions, although their current depressed level suggests a similar outcome from here would be unlikely.

• Base case: We assume a 5-10% drop in EPS reflecting a slowing of economic activity and downward pressure on Financials profits (that still account for 30% of the market). FX weakness would be likely to provide some modest support to EPS over time. This assumption is smaller than the 11% decline in EPS seen during 2011-2012.
• Bear case: We assume 15-20% drop in EPS based on our economists’ forecast for deeper GDP slowdown under their ‘severe stress’ scenario

MSCI Europe

The base case view is of a vote for the UK to remain in the EU, and a resulting stock rally. In the tables below MS applies its expected price moves in bull, base and bear scenarios against the underlying index’s average price level over the last 3 months (note the numbers are virtually identical if compared versus L6M). For example:

• MSCI Europe is currently 4.5% below its L3M average.
  
• Hence, in the base case view that European equities would fall 15-20% under Brexit, this leaves a further 10.5% to 15.5% to go.
• This implies an index range of between 1070-1137 for MSCI Europe versus the current level of 1278. In the event of a vote to remain MS assumes a 5-10% relief rally. If this upside is applied against the L3M average then it implies upside of …read more

  Source: Morgan Stanley Expects Unprecedented Market Moves No Matter How Brexit Vote Goes

      

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By Tyler Durden

In the aftermath of the tragic murder of British Labour MP Jo Cox, the most poignant – and debated – question that has emerged is whether the shooter, 52-year-old white male Thomas Mair, was motivated by political ideology especially since as some eyewitness have claimed he shouted “Britain First” during his deadly attack and is now being probed for “far-right links”, or if he was simply mentally ill.

The reason is simple: just like in the aftermath of the mass Orlando shooting, both Brexit camps are trying to score political points by presenting the lone shooter as indicative of the ideology they are trying to protect the UK from.

As we reported earlier, none other than Angela Merkel promptly tried to portray the event as an example of “radicalization”, suggesting that the murder was ideologically provoked: She said that the “total exaggeration and radicalization of the debate doesn’t contribute to facilitating such respect. So for all of us who value democratic rules, we know how important it is to establish boundaries in one’s choice of language and argument as well as the choice in a sometimes disparaging way of arguing — and to engage with respect those who think and believe and love differently… Otherwise it will be difficult to stop radicalization.”

And while the question of radicalization is certainly relevant, is it fair or event ethical, to bring it up in the aftermath of Cox’ murder if the shooter had no rational, ideological motive and was simply insane? The answer will likely never be revealed as every side will use whatever narrative suits it, we do know some facts.

As the Guardian reported overnight, the picture that emerged of the man known as Tom or Tommy from those who knew him best was of a quiet and caring loner. His half brother, who is mixed race, claimed he had been volunteering at a school for children with disabilities for several years and had never expressed any racist views. Duane St Louis, 41, described his brother as a devoted son who shopped for their mother twice a week and who had visited her on Wednesday night to help tune her TV.

St Louis insisted his brother had never expressed any racist views and seemed fine to have a mixed-race sibling. Asked whether he had any strong political views, St Louis said: “Not that I know of.” He said he had no idea how Mair had got hold of a gun and did not have any hobbies that would require a firearms licence.

Mair grew up not with his mother, Mary, but his maternal grandmother, Helen, who died in 1996. The pair lived in a semi-detached house on the Fieldhead estate in Birstall, 15 minutes walk up the hill from where Cox was killed. St Louis said his brother lived alone after their grandmother’s death and had never married or had children. He had not had a girlfriend for years. “He had one girlfriend when he was younger but his mate took her off …read more

Source: Profiling Jo Cox’s Killer: Was He A "Terrorist" Or Just Insane

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By Tyler Durden

Earlier today, when breaking down the “mutiny” at the State Department which as the WSJ reported saw over 50 staffers demand that military strikes be launched against Syria to eliminated president Assad “as the only way to defeat the Islamic State”, we suggested that one of the untold motives behind this surprising revolt, a very disturbing one, is that this was merely a trojan horse proposal to push the Saudi agenda.

As we hinted, the US may be merely pandering to Saudi demands, something it has clearly done very well ever since the Sep 11 attacks which covered up Saudi involvement:

The cable also echoes the growing impatience among U.S. Gulf allies with the lack of military intervention targeted at the Damascus government to force Mr. Assad to resign and make way for a transitional government. Peace talks between Syria’s government and opposition collapsed in April over Mr. Assad’s fate, with the regime insisting he should stay in power, while the negotiated cease-fire continued to disintegrate. Saudi Arabia and the United Arab Emirates have pressed the U.S. to provide more sophisticated weapons to rebels. But Washington has resisted.

In other words, if the US does fold and proceeds with military strikes, i.e. full blown invasion and war, on Assad, it will once again be Saudi Arabia that is running US foreign policy, and pushing the US nation into what may be a state of open war with Russia.

As we concluded “we can only hope the American people wake up and stop this travesty
before Saudi Arabia’s favorite presidential candidate is elected
president.”

Then moments ago, the Saudi foreign minister Adel al Jubeir who is visiting the US and just concluded a meeting with President Obama confirmed just that when he said that “Saudi Arabia supports a more aggressive military approach in Syria to get Assad to agree to a political solution.”

The Foreign Minister says Saudi Arabia supports a more aggressive military approach in Syria to get Assad to agree to a political solution.

— Mark Knoller (@markknoller) June 17, 2016

In other words, he is urging Obama, or rather not the lame duck president, but rather his replacement, to fight a way for Saudi Arabia, one which may result in another far more serious war, that with Russia.

Which, of course, explains our article from early this week, namely the stunning admission by the Saudi Crown Prince that “Saudi Arabia Has Funded 20% Of Hillary’s Presidential Campaign.” We can already guess what one of president Hillary’s first foreign policy decisions will be: sending even more US troops to fight an offensive Saudi war against the sovereign state of Syria.

And then, in another curious admission, Jubeir also backtracked on his warning from mid-April in which he said that pursuing legal action against the Saudis over Sept 11 would lead to the Kingdom’s dumping of hundreds of billions in US reserves, and instead is now encouraging the release of the classified 28 pages on the September 11 attacks.

<p dir="ltr" …read more

Source: Saudi Foreign Minister Urges Release Of Classified Sept 11 Pages, "Supports More Aggressive Approach To Syria"

    

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By Tyler Durden

Submitted by Patrick Buchanan via Buchanan.org,

If the cliches hold – nothing succeeds like success, the past is prologue – this generation will not likely see an end to the jihadist terror that was on display at Pulse in Orlando on Sunday.

For terrorism has proven to be among the most cost-effective and successful strategies of war that the world has ever seen.

Consider. The 9/11 attacks involved 19 hijackers willing to crash airliners into four buildings: the World Trade Center towers, the Pentagon and the Capitol.

So doing, those 19 altered the foreign policy of the United States.

They drew the world’s last superpower into wars that have bled and almost bankrupted us, broken a president, and left us mired in half a dozen civil and sectarian conflicts with no exit or end in sight.

As a political terrorist, Osama bin Laden rivals Gavrilo Princip, whose assassination of the Austrian archduke set in train the events that led to the Great War that brought on the downfall of the West.

Consider the success of Islamist terror since 9/11.

As Gerry Seib of The Wall Street Journal notes, in the 15 years since then, just 95 Americans have died in jihadist attacks in the U.S.

Yet, one atrocity in Orlando, where 49 were slaughtered, polarized the nation, brought the presidential candidates to savaging one another, and held a national TV audience spellbound for a week.

The whole world is talking about Orlando.

And what did this victory cost the Islamic State?

Zero. What Omar Mateen did suicide bombers do every day in Iraq, Syria and Afghanistan, kill dozens of innocent people while shouting “Allahu Akbar!”

Yet compare the returns from this act of Islamist terror in Orlando, to those from similar attacks in Kabul, Baghdad or Damascus.

Any wonder ISIS would implore its followers to strike where they are, inside the U.S., inside Europe, and not come to Syria to die anonymously?

Under siege in Raqqa, Mosul and Fallujah, being bombed and bled as it surrenders the conquered lands of its caliphate, ISIS’ shift in strategy and targeting makes perfect sense.

Consider, now, the triumphs of Islamist terrorism in Europe.

The 2004 Madrid train bombings led to the defeat of a centrist government and rise of a socialist regime that pulled Spanish troops out of Iraq.

The Paris attacks on Charlie Hebdo and the Bataclan theater strengthened the National Front of Marine Le Pen.

The Beslan massacre of school children in North Ossetia in 2004 led to a consolidation of power by Russian strongman Vladimir Putin.

Across Europe, the political impact of Islamist terrorism, though the numbers of dead and wounded have been, measured against the casualties of conventional war, relatively few, has been extraordinary.

Islamist terrorism has helped spawn anti-immigrant parties and “illiberal” regimes. The association of Islamic terror with Muslim immigration and refugees from Syria’s war has helped to drive “Brexit,” the British campaign to secede from the EU.

Islamist attacks have helped propel anti-EU movements and to incite nationalist demands for a recapture of state control of borders and security policy from Brussels.

Obama explains his reluctance to use …read more

Source: Is Islamic Terror America’s Future?

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White House calls on states to lessen licensing burdens on workers and increase portability of licenses across state lines. …read more

Source: Opinion: Why job licenses hurt the economy

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