Markets wrong-footed
“Not surprisingly, this morning the referendum result has sent shockwaves through global financial markets,” he said in a note to clients.
“It’s scary, and I’ve never seen anything like it,” James Butterfill, head of research and investments at ETF Securities, said in London.
“A lot of people were caught out, and many investors will lose a lot of money,” he told Bloomberg News.
After rallying above $1.50 at the time voting ended, the pound steadily crumbled to its lowest level since 1985, at $1.3229 at one point, before unwinding some losses.
The dollar slumped briefly to 99.02 yen, the first time it has gone below 100 yen since November 2013, before edging back up above 102 yen. The Japanese unit is considered a safe bet in times of uncertainty and turmoil.
Highlighting the uncertainty, US investment bank JPMorgan Chase warned that it could relocate UK jobs abroad.
Banks took some of the biggest hits. In Britain, Lloyds tumbled 21 percent, RBS 18.8 percent and Barclays 17.7 percent.
In France, shares in Societe Generale plunged 20pc and BNP Paribas by 17.4pc, while in Germany, Deutsche Bank slumped 14.1pc and Commerzbank by 13pc.
Spain’s Santander sank 20pc and Italy’s Unicredit fell nearly 24pc.
Gimme shelter
Investors also sought the relative safety of government bonds. The price on the German benchmark 10-year sovereign bond rose sharply, pushing its yield into negative territory for only the second time in its history.
UK government bonds also rose, taking their 10-year yield to a historic low.
Gold, a traditional refuge asset, struck a two-year high.
But elsewhere, billions of dollars were wiped off investment portfolios.
India’s rupee, the Canadian dollar and the Singapore dollar all suffered heavy losses, while the South African rand lost six percent on the day as emerging markets were hurt by sudden aversion to risk.
The shock referendum outcome also sent oil prices tumbling more than $2 per barrel on fears that economic fallout could weigh on future energy demand.
Published in Dawn, June 25th, 2016