Sterling slides as Brexit alarm spreads
LONDON - Agence France-Presse
REUTERS photoBritain battled to stop worldwide Brexit alarm on June 27 as sterling crumbled to a three-decade low against the dollar, while bank, airline and property shares plummeted.
Other world markets steadied a little after Britain’s June 23 vote to abandon the European Union wiped $2.1 trillion off international equity values on June 24.
Analysts warned of a volatile period ahead as global investors grappled with the financial consequences of the Brexit referendum.
“Today I want to reassure the British people, and the global community, that Britain is ready to confront what the future holds for us from a position of strength,” Britain’s finance minister, George Osborne, declared before European financial markets opened.
Britain’s economy is “as strong as could be,” the minister said.
The pound skidded to $1.3222 in morning London trade, its lowest level against the dollar since September 1985.
London’s FTSE 100 index, which boasts many international companies, fell 1.5 percent in morning trade, masking steeper falls in key sectors likely to be affected by Brexit.
“George Osborne’s comments have clearly prevented a much more dramatic decline early June 27, but markets will remain incredibly volatile throughout the long-winded process of exiting the EU,” said Interactive Investor equity strategist Lee Wild in London.
British budget airline EasyJet, which warned of a Brexit hit to sales, fell 16 percent. International Airlines Group, parent of British Airways and Iberia, dropped 9.4 percent.
Royal Bank of Scotland shares plunged 15 percent. Lloyds Banking Group fell 8.9 percent.
British construction group Taylor Wimpey tumbled 12.4 percent.
There are fears the British vote will usher in another global market rout just months after a China-fuelled sell-off at the start of the year.
Morgan Stanley economist Chetan Ahya tipped a new round of monetary easing in Asia to limit the fallout.
“We think near-term focus of policymakers will be to mitigate adverse impacts on financial conditions. Specifically, we expect policymakers to introduce liquidity injections measures,” he said.
Japanese Prime Minister Shinzo Abe held an emergency meeting with top officials early June 27 to discuss how to deal with the market fallout.
“It is going to be a very tough week,” predicted James Audiss, senior investment adviser at Shaw and Partners in Sydney.
“Unless an investor has a really strong view one way or the other, you’d be brave to buy in. It will be a really volatile week,” he said.
Chinese Premier Li Keqiang said Britain’s departure from the EU created new uncertainties in the world economy at a time when downward pressures on China’s economy are mounting.