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Pound Sterling, stocks plunge as Britain exits EU; PM Cameron announces resignation
This is also as Prime Minister, David Cameron, announced his resignation from office, which according takes effect from October.
Camreon said his decision comes as Britons ignored his pleas to stay in the European Union and voted in a referendum to leave.
“I do not think it would be right for me to try to be the captain that steers our country to its next destination,” Cameron told reporters on Friday outside his Downing Street office.
Cameron, who choked back tears, gave no detailed timetable but said there should be a new leader by the time his Conservative Party holds its annual conference in October.
“This is not a decision I’ve taken lightly but I do believe it is in the national interest to have a period of stability and then the new leadership required,” he said.
“I think it’s right that this new Prime Minister takes the decision about when to trigger article 50 and start the process of leaving the EU.”
This Brexit vote sums up weeks of tension in what observers had termed the ‘Brexit’ or British exit from EU.
Such a body blow to global confidence could well prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all the major central banks.
Risk assets were scorched as investors fled to the traditional safe-harbours of top-rated government debt, Japanese yen and gold.
Billions were wiped from share values as FTSE futures fell 7 percent, EMINI S&P 500 futures 5 percent and Japan’s Nikkei 7.6 percent. European stock markets were set to up 6-7.5 percent lower.
The British pound collapsed no less than 18 U.S. cents, easily the biggest fall in living memory, to hit its lowest since 1985. The euro in turn slid 3.1 percent to $1.1022 as investors feared for its very future.
Nearly complete results showed a 51.8/48.2 percent split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War Two.
Sterling sank a staggering 10.1 percent to $1.3387, having carved out a range of $1.3228 to $1.5022. 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.
“It’s back to the future, we’re back to where we were in 1985,” said Nick Parsons, co-head of global currency strategy at NAB in London.
“We’ve had a 10 percent decline in six hours. That’s simply extraordinary, and a vote to leave provides an existential crisis for Europe.”
The shockwaves affected all asset classes and regions.
The safe-haven yen sprang higher to stand at 101.34 per dollar, having been as low as 106.81 at one stage. The dollar decline of 4 percent was the largest since 1998.
That prompted warnings from Japanese officials that excessive forex moves were undesirable. Indeed, traders were wary in case global central banks chose to step in to calm the volatility.
Bank of Japan Governor Haruhiko Kuroda said the bank was ready to provide liquidity if needed to ensure market stability and a source said the Bank of England was in touch with other major central banks ahead of the market open there.
Other currencies across Asia suffered badly on worries that alarmed investors could pull funds out of emerging markets.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid almost 5 percent, while Shanghai stocks lost 1.1 percent.
Financial markets have been racked for months by worries about what Brexitwould mean for Europe’s stability.
“Obviously, there will be a large spill over effects across all global economies if the “Leave” vote wins. Not only will the UK go into recession, Europe will follow suit,” was the gloomy prediction of Matt Sherwood, head of investment strategy at fund manager Perpetual in Sydney.
Investors duly stampeded to sovereign bonds, with U.S. 10-year Treasury futures jumping over 2 points in an extremely rare move for Asian hours.
Yields on the cash note fell 24 basis points to 1.49 percent, the steepest one-day drop since 2009 and the lowest yield since 2012.
The rally did not extend to UK bonds, however, as ratings agency Standard and Poor’s has warned it would likely downgrade the country’s triple A rating if it left the EU.
Yields on 10-year gilts were indicated up 20 basis points at around 1.57 percent, meaning higher borrowing costs for a UK government already struggling with a large budget deficit.
Across the Atlantic, investors were pricing in even less chance of another hike in U.S. interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.
Commenting to the development, a Public Affairs analyst Dr. Ozodi Osuji, said it had become inevitable for the British to vote against a stay in the EU following immigration laws that the populace deemed unfavourable to the existence.
“The EU allowed Eastern Europeans, Slavs, who came from low wage countries to flock into Britain and drive down wages. British folks now are unable to obtain good paying jobs; when they do obtain jobs it is at low wages because the Slavs whose minimum wages at home is very low take whatever employers give to them in Britain.
“The UK wanted to put a stop to the inflow of supposed inferior people. The same thing happened in 1979 when many Asians from Uganda and East Africa in general were kicked out (by Idi Amin) and they came to Britan; suddenly, millions of Asians were everywhere in Britain and white British become resentful. Wages were driven down by Asians taking jobs at lower wages than the British were willing to work for and the British working class became angry at the foreigners. Nationalist parties, such as Enoch Powell’s party rose to preach anti-foreigners gospel.
“The British elected a nationalist masquerading as a conservative, Margret Thatcher. Her government passed laws keeping non-British out of Britain or minimized their entry by making it difficult.”
Additional report by Reuters
