Bond prices rose sharply as investors sought safety.
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In a joint statement, the finance ministers and central bank governors of the G-7, which includes the USA and Britain, said they would be monitoring financial markets closely and doing what they can to support them. The Nasdaq composite dropped 172 points, or 3.5 per cent, to 4,737.
Many analysts have been warning to sit tight for a while because negative news in the world could take the bank stocks down even further.
“This was really an event that caught most global investors flat-footed”, said Jack Ablin, chief investment officer of BMO Private Bank. The move could drain confidence among companies and business in Britain and the wider European Union, which some fear could even face more defections.
“We’re seeing some selling pressure today primarily because a lot of investors and market participants were not anticipating this outcome”, said David Lefkowitz, senior equity strategist at US Bank Wealth Management Americas in NY. “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”.
Bond prices surged and yields fell.
Treasury yields held higher, with the 2-year yield near 0.78 percent and the 10-year yield around 1.74 percent. United States banks have big London operations.
Disney, Time Warner, Viacom, Netflix and CBS Corp. registered declines in the 2 percent-4 percent range.
Banks were among the biggest losers in premarket trading. “The markets despise uncertainty, yet that is exactly what they’re faced with this morning”, Dennis de Jong of the British stock trading company UFX.com told the BBC. Apple fell 2.8 percent and Microsoft 4.0 percent.
Meanwhile, oil prices fell 5 per cent, the loonie was down 1.9 per cent and bond markets were generally lower. In early trades Friday, the local unit was trading at US$0.7635, up from US$0.7526 on Thursday. Market heavyweight Fast Retailing is higher by more than 1 percent. Gold jumped $59.30, or 4.7 per cent, to $1,322.40.
Markets across the globe have been rattled over the past two weeks as investors speculated about the consequences of Britain’s exit, including the unraveling of the bloc. Shares in Anglo American, Antofagasta, Glencore and BHP Billiton all rose between 2 per cent and 3.6 per cent.
The pound fell dramatically, to $1.3684, its lowest level since 2009.
Amid the turmoil, sterling hit a 31-year low in its biggest intraday percentage fall on record and Prime Minister David Cameron said he would step down by October.
The pound fell the most on record, Japanese stocks lost the most since 2011 and the Euro Stoxx 50 Index tumbled the most since at least 1987. Brent crude, the worldwide benchmark, fell $2.50, or 4.9 percent, to $48.41 a barrel in London.
The CETA trade deal between Canada and the European Union, which has been negotiated over the past 7 years, could be over.
THE EURO: While Britain never adopted Europe’s common currency, the vote to leave got investors anxious that the EU could weaken as an economic bloc if other countries also made a decision to leave, or to postpone joining. Britain’s European Union referendum has been a cloud hanging over the global economy for the past few months and that cloud has got very dark this morning.
Investors had sent stocks higher this week as they gradually grew more confident, based on polls and the changing odds in the betting market, that Britain would stay in the E.U. They sent the pound to its highest price of the year and sold bonds, pushing yields higher. Those gains were rapidly undone Friday.
Britain’s FTSE 100 dropped 3.1 per cent.
It could also threaten London’s position as one of the world’s pre-eminent financial centers as professionals could lose the right to work across the EU.
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Advancing issues outnumbered declining ones on the NYSE by a ratio of 4.98-to-1, and on the Nasdaq, a 3.57-to-1 ratio favored advancers. The French CAC 40 also plummeted almost 360 points, or eight percent, to mark the steepest fall among major European bourses.
