Reuters 38 minutes ago
By Marc JonesLONDON (Reuters) - World stocks headed for one the biggest slumps on record on Friday 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.
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 (.FTSE) drop 6 percent in early deals, Germany's (.DAX) and France's CAC 40 (.FCHI) 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 Thursday 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 (LLOY.L) and Barclays (BARC.L) plunging as much as 30 percent. EMINI S&P 500 futures (ESc1) were down 4 percent and Japan's Nikkei (.N225) 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 (EUR=) 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 (GBP=), 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.
The safe-haven yen sprang higher to stand at 102.15 per dollar (JPY=), having been as low as 106.81 at one stage. The dollar peak decline of 4 percent was the largest since 1998.
That prompted warnings from Japanese
officials that excessive forex moves were undesirable. Indeed, traders
were wary in case global central banks chose to step in to calm the
volatility.
The Bank of England said it would take all necessary steps to shield Britain's economy. A source told Reuters it was in touch with other major central banks. The Bank of Japan Governor Haruhiko Kuroda added his bank was also ready to provide liquidity if needed to ensure market stability.
Other currencies across Asia and in eastern Europe as it woke up suffered badly on worries that alarmed investors could pull funds out of emerging markets. Poland, where many of the eastern Europeans in Britain come from, saw its zloty (PLN=) slump 5 percent.
RECESSION FEARS
Europe's natural safety play, the 10-year German government bond, surged to send its yields tumbling back into negative territory and a new record low. [EUR/GVD]
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> slid almost 5 percent, while Shanghai stocks (.SSEC) lost 1.1 percent.
Financial markets have been gripped for months by worries about what Brexit, or a British exit from the European Union, would mean for Europe's stability.
"Obviously, there will be a large spill-over effects across all global economies if the "Leave" vote wins. Not only will the UK go into recession, Europe will follow suit," was the gloomy prediction of Matt Sherwood, head of investment strategy at fund manager Perpetual in Sydney.
Investors duly stampeded to sovereign bonds, with U.S. 10-year Treasury futures (TYc1) jumping over 2 points in an extremely rare move for Asian hours.
Yields on the cash note fell 24 basis points to 1.49 percent, the steepest one-day drop since 2009 and the lowest yield since 2012.
As investors sought safer assets, the rally even extended to UK bonds, despite ratings agency Standard and Poor's warning it would likely downgrade the country's triple A rating if it left the EU.
Yields on benchmark 10-year gilts fell 27 basis points to 1.108 pct .
Across the Atlantic, investors were pricing in even less chance of another hike in U.S. interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.
"It adds weight to the camp that the Fed would be on hold. A July (hike) is definitely off the table," Mike Baele, managing director with the private client reserve group at U.S. Bank in Portland, Oregon.
Fed funds futures <0#FF:> were even toying with the chance that the next move could be a cut in U.S. rates.
The Bank of England said it would take all necessary steps to shield Britain's economy. A source told Reuters it was in touch with other major central banks. The Bank of Japan Governor Haruhiko Kuroda added his bank was also ready to provide liquidity if needed to ensure market stability.
Other currencies across Asia and in eastern Europe as it woke up suffered badly on worries that alarmed investors could pull funds out of emerging markets. Poland, where many of the eastern Europeans in Britain come from, saw its zloty (PLN=) slump 5 percent.
RECESSION FEARS
Europe's natural safety play, the 10-year German government bond, surged to send its yields tumbling back into negative territory and a new record low. [EUR/GVD]
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> slid almost 5 percent, while Shanghai stocks (.SSEC) lost 1.1 percent.
Financial markets have been gripped for months by worries about what Brexit, or a British exit from the European Union, would mean for Europe's stability.
"Obviously, there will be a large spill-over effects across all global economies if the "Leave" vote wins. Not only will the UK go into recession, Europe will follow suit," was the gloomy prediction of Matt Sherwood, head of investment strategy at fund manager Perpetual in Sydney.
Investors duly stampeded to sovereign bonds, with U.S. 10-year Treasury futures (TYc1) jumping over 2 points in an extremely rare move for Asian hours.
Yields on the cash note fell 24 basis points to 1.49 percent, the steepest one-day drop since 2009 and the lowest yield since 2012.
As investors sought safer assets, the rally even extended to UK bonds, despite ratings agency Standard and Poor's warning it would likely downgrade the country's triple A rating if it left the EU.
Yields on benchmark 10-year gilts fell 27 basis points to 1.108 pct .
Across the Atlantic, investors were pricing in even less chance of another hike in U.S. interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.
"It adds weight to the camp that the Fed would be on hold. A July (hike) is definitely off the table," Mike Baele, managing director with the private client reserve group at U.S. Bank in Portland, Oregon.
Fed funds futures <0#FF:> were even toying with the chance that the next move could be a cut in U.S. rates.
Commodities
likewise swung lower as a Brexit would be seen as a major threat to
global growth. U.S. crude (CLc1) shed $3.00 to $47.11 a barrel in
erratic trade while Brent (LCOc1) fell as much as 6 percent to $47.83
before clawing back to $48.18.
Industrial metal copper (CMCU3) sank 3
percent but gold (XAU=) galloped more than 6 percent higher thanks to
its perceived safe haven status. [GOL/]
(Editing by Toby Chopra)
Finance 14 hours ago
Britain has voted in its
historic EU referendum. Also known as the Brexit vote, the EU referendum
allowed Brits to decide whether to 'remain" or "leave" the EU.
However, the vote count did not unfold as expected.All of the votes have been counted, and 52% of voters voted "leave" while 48% voted "remain."
Initially, stocks soared and the British pound rallied as voters headed to the polls. After the polls closed, the early results reflected a healthy lead for the 'remain' vote, which is what most experts had forecasted.
But a little after midnight in London, or 7pm in New York, the 'leave' vote won in the district of Sunderland by a shockingly wide margin. And as more and more votes were tallied, more and more districts confirmed that voters wanted to make their Brexit.
The British pound crashed to a 31-year-low and stock market futures plunged. Global markets are tumbling.
Economist Samuel Tombs characterized the event as “an act of economic self-harm with global ramifications."
"The potential
for additional referendums could be more disconcerting if it threw the
notion of a unified European economy into doubt," Citigroup strategist
Tobias Levkovich said last week. "In this respect, the Brexit vote itself is less important than a series of follow-on votes around the Continent."
Jun 22 2016 11:15 PM
EU Referendum Live
- Britain has voted to leave the European Union in a historic referendum
- The Leave campaign has claimed victory with 51.9% of the overall vote
- David Cameron has signalled his intention to resign as Prime Minister
- The pound is in turmoil - it initially soared after polls predicted a Remain result, before tumbling after pro-Leave results started to trickle in
- The future of the union is now in question, with Scotland and Northern Ireland both voting to Remain in the EU
- an hour ago
David Cameron makes his resignation speech outside Downing Street on Friday morning
in 31 minutes
Police dispersed crowds of cyclists gathered outside Boris Johnson's home this morning as they atempted to block his car.
With early results in Britain’s E.U. referendum showing strong support for the campaign to leave the union, many in the U.K. appear to be panic Googling.
Google Trends reports that the search engine has seen a 250% spike in searches of the question “What happens if we leave the E.U.?”
The answer, of course, is complicated, and has been the subject of intense debate during the months running up to Thursday’s vote. Most economists believe a vote to leave would cause damage to the British economy, at least in the short term, and world leaders have warned that a “Brexit” would give the U.K. less influence in world affairs and could lead to the breakup of the E.U. itself.
The campaign to leave has focused on returning powers from Brussels to the U.K. and on the impacts of immigration under the E.U.’s rules on the free movement of people.
Other popular “what if…?” questions queried what would happen if the referendum is a draw (highly unlikely, given that more than 46 million people had registered to vote), and “What if the value of the pound decreases?” (which is already happening).
Google Reports Surge in Brits Asking ‘What Happens if We Leave the E.U.?’
Simon Lewis,Time
6 hours ago
With early results in Britain’s E.U. referendum showing strong support for the campaign to leave the union, many in the U.K. appear to be panic Googling.Google Trends reports that the search engine has seen a 250% spike in searches of the question “What happens if we leave the E.U.?”
The answer, of course, is complicated, and has been the subject of intense debate during the months running up to Thursday’s vote. Most economists believe a vote to leave would cause damage to the British economy, at least in the short term, and world leaders have warned that a “Brexit” would give the U.K. less influence in world affairs and could lead to the breakup of the E.U. itself.
The campaign to leave has focused on returning powers from Brussels to the U.K. and on the impacts of immigration under the E.U.’s rules on the free movement of people.
Other popular “what if…?” questions queried what would happen if the referendum is a draw (highly unlikely, given that more than 46 million people had registered to vote), and “What if the value of the pound decreases?” (which is already happening).
How to watch the nail-biting Brexit votes roll in live
Quartz,Quartz 6 hours ago
Brexit is upon us. Voters in Britain have gone to the polls, and
while the final results are expected between 5am and 7am this morning
(June 24) local time in Britain, early signs show that the “leave” vote
is much stronger than expected. For live coverage of the results from
the 382 constituencies in the UK online, we recommend: The Times of
London has a live coverage page with regional breakdowns of the voting,
both in individual charts and, further down, an interactive map. BBC has
a live page with the latest developments, and another with the results
in full (the page updates automatically). You can also watch Sky News
live in some countries. Need some background? Here’s a Quartz Brexit
summary ...
As more than 95 percent of the results have been declared, the
Leave campaign is leading in the crucial referendum on whether the
United Kingdom will stay in the European Union or leave. The Leave
campaign is leading with about 52 percent of the votes so far against
Remain's about 48 percent -- but all the votes have not been counted
yet. Each side needs 16.8 million votes to win -- as of 12:45 a.m. ET,
Leave had around 16.4 million votes against Remain's about 15.3 million
votes. Leave's lead has led the Pound to fall to $1.39 -- a significant
9.25% drop because $1.40 has been the floor for the Pound since the mid
1980s. The first results from England today showed greater than expected
support ...
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