British Referendum Wreaks Havoc in Global Markets

June 24, 2016

British voters chose to leave the European Union by a margin of 51.9% to 48.1.  Extensive coverage provided in Deeper Analysis.

British Prime Minister Cameron, who campaigned to remain in the EU, resigned and will step down in the fall.

The pound swung adversely against the dollar by as much as 11.9%, most ever, dropping from $1.5019 to a 31-year low of $1.3229.  Compared to Thursday closing levels, the dollar is up 9.5% against the pound, 3.2% versus the euro and Australian dollar, 2.5% relative to the kiwi, 2.2% vis-a-vis the loonie, 1.4% against the Swiss franc and even 0.6% versus the yuan.

The Japanese Nikkei fell 7.9%. Stocks elsewhere in the Pacific Rim dropped 3.1% in Hong Kong, 3.2% in Australia, 2.2% in India and New Zealand, 3.1% in South Korea, 2.6% in Hong Kong, and 2.1% in Singapore.  In Europe, stocks plunged especially sharply in countries that were at the center of the debt crisis:  Greece (down 16.6%), Italy (10.2%) and Spain (11.4%).  Stocks also fell 8.4% in France, 6.9% in Germany, 6.3% in Portugal, 4.4% in the U.K. and 3.4% in Switzerland.  In futures trading, a 5.1% drop in the S&P 500 triggered a circuit breaker.

Gold leaped 5.1% to $1,326.90 per ounce, while WTI oil slumped 4.7% to $47.76 per barrel.

Among 10-year sovereign debt yields, those in the U.S., Britain and Germany fell 27,33, and 21 basis points.  The Greek yield shot up almost a percentage point, however, and Spanish, Italian and Portuguese climbed substantially, too.

Several emerging market currencies like the rand and zloty tanked.

The German IFO business climate index improved 1.0 point to a 7-month high in June, but this in part reflected a mistaken assumption by many that Britain would not abandon the European Union.

French GDP expanded 0.6% in the first quarter of 2016 and was 1.3% higher than a year earlier.

Dutch GDP increased 1.5% on quarter and 1.4% on year in 1Q16.

Spanish producer prices posted a 5.5% 12-month decline in May.

Italian retail sales edged up 0.1% on month but remained 0.5% lower on year in May.

Japanese corporate service prices were flat on month and 0.2% higher on year in May.

A slew of statements were released in response to the British referendum:  this from the ECB,  this from the Bank of England, and this from Denmark’s central bank.

The U.S. released durable goods orders and the U. Michigan consumer sentiment index.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


Tags: ,


Comments are closed.