The outcome of Thursday’s UK referendum took most market participants by surprise, with equity and credit markets significantly weaker across the globe. There was a partial recovery on Friday afternoon from the initial selling but futures markets on Monday morning are pointing to further selling in the UK.   Almost all investors except the most conservatively positioned have been effected by these moves and the fact that there is no real precedent in what happens next will cause further market uncertainty. The main economic Brexit linkage into Australia is arguably through commodity prices and national income but the direct impact on Australian trade will be fairly limited.   However, Australian Banks, Insurance and Diversified Financials share key linkages with Europe and the UK and this has been reflected in share price movements. The funding gap (that is the difference between deposits and loans) for the major banks is still significant and although they have moved to reduce this gap over the past few years any disruption to funding markets will impact the cost of funding.   One thing we learned from the Global Financial Crisis is that the first priority for all markets during events such as this is to remain liquid and orderly. Central banks across the globe are on standby to intervene to stabilise money markets and to ensure orderly and reasonable market structure. The real question surrounds the effectiveness of further monetary policy stimulus in a low interest rate environment.   For a copy of our Special Report: Brexit Implications please click here.   Click below for Interactive Charts Chart 1: Bloomberg AUSBond Composite Index (Monthly) Chart 2: Bonds vs Equities 2015/2016 (Monthly)