Britain decides to leave the European Union, sterling suffers biggest ever fall

By Reuters   June 24, 2016 | 11:17 am GMT+7
Britain decides to leave the European Union, sterling suffers biggest ever fall
Dawn breaks behind the Houses of Parliament in Westminster, London, Britain June 24, 2016. REUTERS/Stefan Wermuth

Britain has voted to leave the European Union, the BBC said based on voter tallies from Thursday's referendum, an outcome that would set the country on an uncertain path and deal the largest setback to European efforts to forge greater unity since World War Two.

After more than 90 pct of votes counted, Remain on 14.584 mln votes, Leave on 15.705 mln- itv

- Asian traders "seasick" as UK lurches towards Brexit

- Sterling, stocks in free fall as UK on brink of Brexit

- Prime Minister David Cameron is facing pressure to resign

- Scottish First Minister Nicola Sturgeon said Scotland sees its future as part of the European Union

- Leader of the eurosceptic UK Independence Party hails "Let June 23 go down in our history as our independence day."

- European shares seen opening 6 to 7.5 percent lower. "A bad day for Europe", says Germany's Gabriel

- The results paint a picture of an angry country divided by class, age and region – The Economist 

- German bond yields hit new low after Brexit vote, peripheral spreads widen

A woman watching the Brexit vote in The Churchill Tavern, a British themed pub, reacts as a graph shows the British Pound falling in value following the announcement that Britain would leave the European Union, in the Manhattan borough of New York, U.S., June 23, 2016. Photo by Reuters/Andrew Kelly

A woman watching the Brexit vote in The Churchill Tavern, a British themed pub, reacts as a graph shows the British Pound falling in value following the announcement that Britain would leave the European Union, in the Manhattan borough of New York, U.S., June 23, 2016. Photo by Reuters/Andrew Kelly

Sterling, stocks in free fall as UK on brink of Brexit

Carnage came to world markets on Friday as major television networks said Britain had voted to leave the European Union, threatening the existence of the entire bloc and its single currency.

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 the major central banks.

Risk assets were scorched as investors fled to the safety of top-rated government debt, with FTSE futures off 7 percent and EMINI S&P 500 futures down 3.6 percent.

The British pound had collapsed no less than 15 U.S. cents, easily the biggest fall in living memory, to hit it lowest since 1985. The euro in turn slid 3.4 percent to $1.0997 as investors feared for its very future.

While vote counting had not been concluded, major British television networks including ITV, the BBC and Sky News all called the result as a "Leave" and betting firm BetFair estimated the probability of leaving as high as 94 percent.

Sterling sank a staggering 9 percent to $1.3525, having carved out a range of $1.3462 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.

"The carnage in the FX markets may continue if the leave votes pull further ahead in the lead," said Bernard Aw, markets strategist at IG in Singapore.

"Equities markets will be affected, and we can see that Asian stocks are already under a fair bit of pressure. British banks listed in Hong Kong are suffering significant losses."

HSBC fell 9 percent while Standard Chartered sank almost 10 percent.

The tremors shook all asset classes and regions.

The safe-haven yen sprang higher to stand at 101.52 per dollar, having been as low as 106.81 at one stage. The dollar decline of 4 percent was the largest since 1998.

That dragged the Nikkei down more than 8 percent and 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.

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.

Asian traders "seasick" as UK lurches towards Brexit

 Asian currency, bond and equity traders kicked off an early day of choppy trading as the growing likelihood of a British vote to leave the European Union sent shivers across trading floors and kept many investors glued to their television screens.

Trading desks at most foreign banks from Hong Kong to Singapore started on Friday nearly two hours before their normal start to take in early orders and address investor concerns. But the market meltdown and volatility pushed many traders to the sidelines as they waited for the final vote tally, before taking fresh positions.

"I am getting slightly seasick from the fluctuations between in and out," Michael Blythe, chief economist at Commonwealth Bank of Australia. "I haven't heard this much noise from the dealing room in a very long time," he added.

Britain's bitterly contested referendum on whether to quit the EU began too close to call early on Friday, with partial results showing a deeply divided nation, but the pound was hammered as the numbers slowly tipped in favour of a vote to leave.

The threat of Britain leaving the European Union has had markets across the asset classes on edge.

The British pound fell about 10 percent, while shares in British bank HSBC plc tumbled 8 percent, while the FTSE futures pointed to a 7.5 percent slump at the UK stock market open.

"Volatility has been the theme of the year, and people are getting used to it," said Danny Bao, chief investment officer at HJY Capital Advisors (HK) Ltd. "The big unknown is the complication that a Yes vote (to leave) will create for EU. We are sitting tight for now," he added.

Asian markets were first to open and react as the results vote count tricked in. With results declared from 282 of 382 voting districts plus parts of Northern Ireland, Leave was ahead by 51.6 percent to 48.4 percent..

"Liquidity generally is very light. Even before coming into the voting day, liquidity was generally light. The problem is the market was generally pricing in a 'remain', so obviously you're seeing the pound and currency markets generally recovering back to any risk-off level," one Hong Kong-based fund manager said.

"I don't think it's Armageddon day, but definitely it's a short-term surprise if they voted for a leave," the fund manager said.

Tight liquidity has widened the bid and offer gaps in the Asian credit markets, with very small lots going through in low volume trade. In the CDS market the iTraxx benchmark is trading at 142/145 bps, wider by about 8bps, and traders said it was one of the most volatile days of the year.

One bond taking a big hit was the HSBC 6.875% perpetual , down 4 points in price at 97.5/99. But some high-yield bonds are outperforming as it has caught bids from risk seekers.

"We are seeing some support in high yield from investors rotating out of stocks," said a Singapore based trader. 

Tags: Brexit
 
 
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