Australian ten year bonds are set to break to new lows today after dropping through 2% yesterday. Safe haven assets are the investment du jour. Global bonds, gold, the USD and JPY are all attracting fund flows, at the expense of risk assets, and the Australian share market is set for another day of selling pressure.

“Irreducible uncertainty” is the phrase on bear lips. The implications of Brexit are devolving into a domestic politics sideshow, as both UK major parties are scoured by recriminations, and contemplate new leadership. Calls to accelerate the process from the continent were reversed by German PM Merkel as the UK looks inward. While the major implication for both the UK and Europe appears to be lower growth, the likely torturous process to leave the union could sabotage markets for weeks or months.

Locally, investors are pondering the potential for the Asia Pacific region to benefit from the turmoil. Cashed up long-only funds, obliged to invest in shares, may move towards the higher growth Asian markets after a long period of under investment. However, in the short term, weaker commodity prices and a lower AUD may see investors step away from the market today.