Markets Right Now: US stocks open higher as Britons vote

Stocks are closing solidly higher on Wall Street, giving the market its biggest gain in a month, as hopes grow that Britons will vote to remain in the European Union. 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 Bank of England said it could provide more than 250 billion pounds plus “substantial” access to foreign currency to ease any squeeze in markets, while the U.S. Federal Reserve and the European Central Bank said they were ready to offer liquidity through existing swap lines.

The Dow Jones industrial average tumbled 610.32 points, or 3.4 percent, to 17,400.75.

The Dow fell 274.41 points, or 1.6 percent. Apparent swings in public opinion have driven big moves in financial markets as investors try to anticipate the outcome of the vote. More shares were traded than on any day since August 2011, when Standard & Poor’s downgraded the credit rating of the US government during a crisis over the budget and the country’s debt ceiling. Campaigners for Britain to remain an European Union member say walking out of the biggest free trade area in the world would do irreparable damage to the economy.

Doug Cote, chief market strategist at Voya Investment Management in NY, said that dynamic was a positive one for markets. “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”. When bond prices go up, the yields on the bonds go down, and yields were already very low.

Investors rushed into low-risk sovereign bonds, with United States 10-year notes up around 1.5 points.

Central banks stepped in to bolster confidence, promising to inject liquidity where needed and appearing to mitigate some of the sharpest losses. The Standard & Poor’s 500 index gained 16 points, or 0.8 percent, to 2,101. Also, long-term interest rates are dropping as investors pile into USA government bonds, making lending less profitable. France’s CAC 40 lost 8 percent and Germany’s DAX fell 6.8 percent.

The Nasdaq lost 92.36 points, or 1.9 percent. The shock referendum result dented Britain’s economic growth prospects and sent the value of the pound down by as much as 10 per cent to a 31-year low against the dollar.

Oil prices slumped by more than four percent amid fears of a broader economic slowdown that could reduce demand. Brent crude, the global benchmark, fell $2.50, or 4.9 percent, to $48.41 a barrel in London. That’s its highest price since July 2014. Utility stocks were the only one of the 10 sectors in the S&P 500 index to rise on Friday. It climbed $1.80, or 5.1 percent, to $37.19 and set a three-year high.

The move blindsided investors, who had expected Britain to vote to stay in the European Union, and sparked sharp repricing across asset classes.

Low bond yields are bad for banks because they mean low interest rates on loans and lower profits. Those gains were rapidly undone Friday. Britain’s FTSE 100 fell 3.1 percent, with homebuilders suffering huge losses.

WHAT’S NEXT: Moody’s chief economist Mark Zandi estimates that the European economy would slow down by 0.25 percent if Britain leaves the EU, and the global economy would slip about 0.1 percent.

Specialist Michael Pistillo wears Union Jack socks as he works on the floor of the New York Stock Ex …

Japan’s Nikkei 225 finished a wild day down 7.9 percent, its biggest loss since the global financial crisis in 2008. Hong Kong’s Hang Seng index tumbled 4.4 percent and stocks in Shanghai, Taiwan, Sydney, Mumbai and Southeast Asian countries were sharply lower.

Industrial metal copper sank 1.7 per cent but gold leaped almost 5 per cent higher thanks to its perceived safe-haven status. Frankfurt and Paris each fell 7 per cent to 8 per cent.

The euro also plummeted, dropping 2.6 percent on the dollar.