US stocks plunge after British vote

Britain’s shock vote to pull out of the European Union wiped $2.1 trillion from global equity markets Friday as traders panicked in the face of a new threat to the global economy.

US stock futures unraveled early Friday morning in NY, after the United Kingdom declared its intention to end its four-decade relationship with the European Union after a so-called Brexit vote.

Indications that the “leave” vote has won sets up global markets for the most volatile and frightening trading day since the market sank last August on fears about a slowdown in China’s stock market. Wall Street was due to open sharply lower, with Dow and S&P 500 futures down 2.8 percent and 3.6 percent. The Shanghai Composite and Shenzhen Composite indexes were lower by 1.2 percent and 0.18 percent, respectively, during late afternoon trade.

On Saturday, meanwhile, foreign ministers from the EU’s six founding states issued a joint statement urging Britain to start the process of leaving as soon as possible.

Banks: Many banks use London as a center for European operations, but that’s likely to change as Britain extracts itself from the EU.

“The markets are the best judge of what is going to happen and they are saying that Britain will remain”. Futures for the S&P 500 ESU6, -4.83% tumbled 104 points, or 4.9%, to 17,246 and Nasdaq-100 futures NQU6, -4.85% cratered 221 points, or 4.9%, to 4,241. Utility companies and phone companies pay big dividends compared to most other kinds of stocks. Gold producer Newmont Mining rose the most in the S&P 500 index. “Uncertainty often freezes expansion decisions… it means that the global economy will grow more slowly”, said James Chessen, chief economist at the American Bankers Association.

At midday, travel websites Expedia and Priceline lost 6.2 per cent and 10.4 per cent, respectively. The EURO STOXX 50 had its biggest one-day loss since 1987. “The unexpected outcome is shaking up markets”, said Ben Carlson, money manager at Ritholtz Wealth Management.

By early afternoon in Asia, a tally by the BBC showed Britain had voted to leave the 28-nation European Union by about a 52 percent to 48 percent margin. The pound GBP= tumbled to near $1.32, its lowest level since 1985, before bouncing back to a loss of 8 percent at $1.3678. Germany’s DAX slid as much as 10 percent before recovering slightly to 7.04 percent. Brent crude, the benchmark for worldwide oil prices, rose 82 cents to $51.42 a barrel in London. Benchmark U.S. crude dropped 4 percent in NY. The Dow gained 230 points, or 1.3 percent. That followed five days of declines as investors hoped that Britons would vote to remain in the EU.

Bank of England Governor Mark Carney said he “would not hesitate to take any additional measures” to ensure the stability of the monetary and financial markets. It noted that it has 250 billion pounds ($342 billion) in liquidity available for banks.

Japan’s Nikkei ended down 7.9 per cent, while Hong Kong’s Hang Seng finished 2.9 per cent lower.

Tokyo stocks slumped almost 7 percent, while South Korea’s Kospi index fell about 4 percent. Despite a clamor for the safe haven currency, triggered by Brexit, the yen had weakened somewhat again at 2:30 a.m. EDT, and was trading above 102 to the dollar.