Daily Market Color February 24, 2016Markets Spooked by Weakness in Crude and Pound The risk-off trade continues today as stocks and oil declined while investors piled into the relative safety of Treasuries. Weakness in crude continued to be a major driver after a report showed inventories advanced to an 86-year high and a production agreement between OPEC and non-OPEC producers remained elusive. Speaking at a conference in Houston, Saudi Oil Minister Ali Al-Naimi ruled out production cuts stating that the kingdom doesn’t trust other countries to join in even if they committed. He did reaffirm Saudi Arabia’s commitment to the Saudi/Russia-led production freeze discussed last week, but Iran remains a roadblock to any agreement. The Iranian oil minister said the production cap proposal is putting “unrealistic demands” on Iran as the country seeks to increase output after international sanctions were lifted last month. The ongoing slump in the British pound also weighed on risk assets. The pound fell below 1.40 for the first time since 2007 due to uncertainty over the Brexit referendum in June. HSBC put out a report that described the financial market consequences stemming from a Brexit as severe. Some of the highlights included that sterling could lose another 20% of its value against the US dollar, pushing it towards a level not seen since the mid-1980s, while the ensuing turmoil would reduce 2017 GDP by 1.5%. Confidence in Britain is already waning as the country faces a period of continued uncertainty leading up to the June vote. U.S. economic data released today were generally disappointing. The Commerce Department said new home sales declined 9.2% in January (albeit from a 10-month high) as sales in the West fell 32.1% to the lowest level since July 2014. A separate report showed the services sector contracted earlier this month for the first time since October 2013. The sector was hampered by bad weather and slumping business confidence, and could be a bad sign for the broader economy. There is a $13 billion 5-year note auction at 1pm ET as well as a variety of Fed speakers including Lacker (hawk, non-voter ’16), Kaplan (non-voter ’16), and Bullard (hawk, voter ’16).