Global stocks tumble after Britain votes to leave the EU

Investors rushed for the exit as Brexit – exit of Britain from the European Union – on Friday turned into a reality, sending the domestic stock markets plunging across the board in line with a global sell-off in stocks and currencies. The result stunned investors, who reacted by rushing to the safety of gold and USA government bonds as they wondered what will come next for Britain, Europe and the global economy.

The British pound dived by 18 US cents at one point, easily the biggest fall in living memory, to hit its lowest since 1985.

Stocks on Wall Street traded down around 3 percent, with the Dow Jones industrial average dropping as much as 544 points.

The Standard & Poor’s 500 index fell 75 points, or 3.6 percent, to 2,037.

Sterling sank a staggering 10 percent at one point and was last down 8 percent at $1.3667, having carved out a range of $1.3228 to $1.5022.

Still, Britain’s big banks took a $100 billion battering, with Lloyds, Barclays and RBS plunging as much as 30 percent, although they cut those losses in half later in the day. Traders responded by dumping riskier assets that appeared to have the most to lose from disruptions in financial flows and trade: banks, technology companies and makers of basic materials.

“This entire process is going to take a long time”, said David Kelly, chief global strategist at JPMorgan Asset Management. “When you add to it the specter of the last couple of years of terrorism it causes the average individual.to be more nationalistic, more populist, more protectionist”. Yields on the cash note fell 25 basis points to 1.48 percent, the steepest one-day drop since 2009 and the lowest yield since 2012. The yield on the 10-year U.S. Treasury note plunged to 1.58 percent from 1.75 percent a day earlier, a huge move.

ASIAN STOCKS: Asian stocks were the first to react to the vote and they took huge losses.

The British pound slumped more than 7 per cent against the dollar as turmoil came to the world markets.

Investors also bought utility company stocks and left phone companies basically unchanged while other parts of the market took big losses. USA crude shed $2.02 to $48.09 a barrel while Brent fell 4.3 percent to $48.70 before. DuPont gave up $3.21, or 4.6 percent, to $66 and LyondelBassel Industries lost $4.14, or 5.2 percent, to $74.91. Also, long-term interest rates are dropping as investors pile into USA government bonds, making lending less profitable.

Safety assets soared. Gold jumped $58.70, or 4.6 percent, to $1,322 an ounce.

Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities, said: “Over the short run we expect volatility to stay very high, as central bank’s intervention to stabilise asset prices and market’s attempt to reduce leverage and risk create a ideal storm in financial markets”. The price of silver climbed 41 cents, or 2.4%, to 17.77 dollars an ounce.

HIGH-DIVIDEND STOCKS: Stocks that are similar to bonds also did well. Newmont Mining rose the most in the S&P 500 index.

The pound hit its lowest level since 1985 before recovering slightly to trade at $1.3829.

The British pound plummeted to a 31-year low.

Oil prices fell sharply. Benchmark U.S. crude declined $2.47, or 4.9 per cent, to close at $47.64 a barrel in NY. Benchmark US crude lost$2.14 dollars, or 4.2%, to 48 dollars a barrel in NY. Observers wonder if other nations will follow in Britain’s footsteps by leaving the EU.

“This will be an act of economic self-harm with global ramifications”, said Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics. “The EU will be very tough negotiators with them”.

Some European markets fell even more. Those gains were rapidly undone Friday.

The British pound took a huge loss, plunging more than 10 percent from about $1.50 to $1.35, before recovering somewhat, as investors anxious that Britain’s departure would hurt its economy and diminish London’s role as a global financial hub.

It could also threaten London’s position as one of the world’s pre-eminent financial centres as professionals could lose the right to work across the EU. The German index sank 5.6% and France’s index tumbled 6.5%. 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.

In other energy trading, wholesale gasoline sank 8 cents to $1.53 a gallon.

In other currency trading, the dollar fell to 102.24 yen from 104.47 yen while the euro weakened to $1.1121 from $1.1351. Natural gas lost 4 cents to $2.66 per 1,000 cubic feet.