United States stock index futures dropped late on Thursday as early voting returns suggested Britain was on the verge of leaving the European Union, a move that investors fear could hurt the global economy.
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By 9 a.m. ET (1300 GMT), the number of S&P futures contracts traded had exceeded their daily average for the past year. Investors anxious about the outlook for the world economy sought refuge in the dollar and other safe-harbor assets such as gold and US Treasury bonds, while dumping riskier shares. The yield on the 10-year U.S. Treasury note dropped to 1.56 percent from 1.75 percent on Thursday, a large move. 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. Britain’s FTSE 100 stock index slumped 7 per cent in early trade.
“The US equity markets opened normally for trading this morning”, said Mary Jo White, chair of the US Securities and Exchange Commission.
At one point the British currency hit a 31-year low.
“In the short term, markets will trade on emotion, so make sure you don’t end up becoming your portfolio’s worst enemy”, he said, adding that investors should “stay calm and carry on”.
Central banks have sounded the alarm over a potential Brexit, with chiefs of the Fed, Bank of Japan and Bank of Canada all citing the vote as a potential disruption to the global economy. “This is the biggest risk to markets right now – a possible lack of liquidity like we got during the Lehman crisis”. The Dow Jones futures were lower by 2.82 percent, S&P 500 futures fell 3.73 percent and Nasdaq futures were down by 3.83 percent. The referendum result stunned investors, who reacted by rushing to the safety of gold and USA government bonds as they wondered what’s next for Britain, Europe and the global economy.
Investors had been waiting for the Fed to raise borrowing costs in a nod to an improved economy, but weaker-than-expected growth in USA jobs in recent months forced to put off a rate hike at their meeting last week.
The U.K.’s stunning vote to leave the European Union, dubbed “Brexit”, shocked investors and market analysts. The index had earlier surged as much as 52.11 percent to 26.24, its highest since February. Evidently, the S&P 500 and Nasdaq E-mini futures plunged as much as 5% early today, following the release of this news (according to Reuters). Still, the market is off almost 2 percent on the session. Citigroup was off 9.4 percent. Just after 6 a.m. London time, as most votes were counted, the BBC said there was no way back for the pro-EU side, with voters having backed “Leave” by 52 percent to 48 percent.
Britain was the fifth-largest buyer of U.S. exports past year, with $56 billion in purchases, according to U.S. Census Bureau estimates.
As of Thursday’s close, the S&P 500 index had risen 3 percent since the start of the year. Losses have been pared but remain sharply lower, holding a loss of 513 points, a 2.9% drop, to 17,401.
The Dow Jones Industrial Average is down 369 points, or about 2.1 percent. The Nasdaq composite gained 55 points, or 1.2 per cent, to 4,889.
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The worst performers on the S&P 500 were Delphi Automotive PLC (DLPH), Invesco Ltd., Charles Schwab Corp.(SCHW), Lincoln National Corp.(LNC), and Priceline Group Inc.(PCLN), all closing down 12% or more. In Germany, TV giant ProSiebenSat.1’s stock dropped 6.0 percent. The close to 11 percent fall in the British pound is its biggest single-day fall against the dollar.
