World stocks, British pound in freefall as UK votes for EU exit

World stocks, British pound in freefall as UK votes for EU exit

LONDON - Reuters
World stocks, British pound in freefall as UK votes for EU exit


World stocks headed for one the biggest slumps on record on June 24 as a decision by Britain to leave the European Union triggered 8 percent falls for Europe’s biggest bourses and a record plunge for sterling.

Such a body blow to global confidence could well prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all the major central banks.

Meanwhile, Borsa Istanbul opened with a 5.02 percent fall, the worst drop in 10 months, seeing particularly sharp lows in the stocks of companies that export to the UK in large volumes.

Risk assets were scorched as investors fled to the traditional safe-harbors of top-rated government debt, Japanese yen and gold.

Billions were wiped from share values as Europe saw London’s FTSE drop 6 percent in early deals, Germany’s DAX and France’s CAC 40 slump 7.5 and 9 percent and Italian and Spanish markets plunge more than 11 percent.

The rout was compounded by the fact markets had rallied on June 23 having become increasingly convinced that UK voters would opt to stay in the EU.

Britain’s big banks took a $130 billion battering with Lloyds and Barclays plunging as much as 30 percent.

EMINI S&P 500 futures ESc1 were down 4 percent and Japan’s Nikkei ended down 7.9 percent.

The British pound collapsed no less than 18 U.S. cents, easily the biggest fall in living memory, to hit its lowest since 1985. The euro in turn slid 3.2 percent to $1.1012 as investors feared for its very future.

Having campaigned to keep the country in the EU, British Prime Minister David Cameron confirmed he would step down.

Results showed a 51.9/48.1 percent split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War Two.

Sterling sank a staggering 10 percent at one point and was last at $1.3582 , having carved out a range of $1.3228 to $1.5022. The fall was even larger than during the global financial crisis and the currency was moving two or three cents in the blink of an eye.

“It’s an extraordinary move for financial markets and also for democracy,” said co-head of portfolio investments of London-based currency specialist Millennium Global Richard Benson.

“The market is pricing interest rate cuts from the big central banks and we assume there will be a global liquidity add from them in the next few hours,” he added.

The shockwaves affected all asset classes and regions.