US, Europe stocks plunge after shock Brexit vote : The Tribune India

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US, Europe stocks plunge after shock Brexit vote

LONDON/ NEW YORK: \US stocks and Europe stocks plunged, with the Dow Jones average falling more than 500 points at the open and European shares, led by the region''s banks, falling as much as 9 per cent as shockwaves spread across global markets after they felt the full force of Britain''s vote to leave the European Union on Friday.



London/ New York June 24

US stocks and Europe stocks plunged, with the Dow Jones average falling more than 500 points at the open and European shares, led by the region's banks, falling as much as 9 per cent as shockwaves spread across global markets after they felt the full force of Britain's vote to leave the European Union on Friday.

Investors worried about the outlook for the world economy sought refuge in the dollar and other safe-harbor assets such as gold and US as markets reeled under the biggest blow delivered to the global financial system since the 2008 financial crisis.

Treasury bonds, while dumping riskier shares. The yield on the US 10-year bond hit its lowest since 2012.

Banks and tech stocks were among the biggest losers.

The market was already expected to be volatile as traders adjust portfolios to account for an annual reconstitution of the widely followed Russell stock indexes.

"The participants were caught off guard and it showed a touch of complacency in terms of the vote," said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management in Chicago. "The mood is one of humility so far this morning, and certainty I think that of caution."

At 9:33 a.m. ET (1333 GMT) the Dow Jones industrial average was down 538.21 points, or 2.99 percent, at 17,472.86, the S&P 500 was down 54.85 points, or 2.6 percent, at 2,058.47 and the Nasdaq Composite was down 177.97 points, or 3.62 percent, at 4,732.08.

The CBOE VIX volatility index - known as Wall Street's fear gauge - surged 52.11 percent to 26.24, its highest since February.

Citigroup was down 7.4 percent, while Bank of America , JPMorgan and Goldman Sachs slumped by between 4 and 5 per cent. US. banks have big London operations.

Trading in S&P 500 and Nasdaq futures was halted briefly overnight after they fell more than 5 percent, triggering limit thresholds.

By 9 am ET (1300 GMT), the number of S&P futures contracts traded had exceeded their daily average for the past year.

Britain's FTSE 100 stock index was down 3.7 per cent in afternoon trading. Asian stocks also tumbled.

Amid the turmoil, sterling hit a 31-year low in its biggest intraday percentage fall on record and Prime Minister David Cameron said he would step down by October.

In Europe, the slide in stocks wiped off about 650 billion euros ($726 billion) from the market value of Europe's listed shares.

US short-term interest rate futures rose amid speculation the Federal Reserve could cut interest rates to help shield the economy from any global fallout.

Investors have been waiting for the Fed to raise borrowing costs as the economy improves.

The Federal Reserve, which had earlier said a Brexit could have "significant repercussions" on the economic outlook, sought to calm markets on Friday by saying it was ready to provide dollar liquidity. 

Oil prices, which are sensitive to changes in the economic outlook, dropped more than 4 per cent, the biggest fall since early February. Exxon and Chevron were down about 2.5 per cent. 

Europe down

The pan-European STOXX Europe 600 index fell 7.3 percent by 1036 GMT after dropping as much as 9 per cent, while the FTSEurofirst 300 slid 7.1 per cent.

UK's blue-chip FTSE 100 fell 4.7 per cent, with volumes hitting more than 100 per cent of their 90-day daily average in just one hour of trading.

Among gold miners, Barrick was up 5.7 per cent and Newmont Mining was up 6 per cent.

Apple, which got more than a fifth of its revenue from Europe last quarter, was down 2.2 per cent.

US stocks had risen in recent sessions as investors bet that Britain would remain part of the EU.

As of Thursday's close, the S&P 500 index had risen 3 percent since the start of the year.

Declining issues outnumbered advancing ones on the NYSE by 1,514 to 99. On the Nasdaq, 2,417 issues fell and 147 advanced.

The S&P 500 index showed two new 52-week highs and six new lows, while the Nasdaq recorded eight new highs and 66 new lows.

"The single-largest macro risk for Europe this year ... has crystallised," Goldman Sachs said in a note. "The decision lowers the growth outlook for the UK and Europe amid heightened policy uncertainty and threatens tighter financial conditions." Britain's shock decision also reawakened concerns of ripple effects on the continent, with some investors pointing to Italy as the next risk to watch, while Spain was due to hold a general election on Sunday.

"While the referendum has left Britain in tatters, the European Union needs to make a quality leap fast to avoid the emergence of populism," said Andrea Cuturi, Chief Investment Officer at Anthilia Capital Partners in Milan.

"It's not a an accident that Milan and Madrid (stock exchanges) are faring worst. Spain has a general election just around the corner and in Italy the government has just lost local election and has a big banking problem to deal with." An escalation of political risk in Europe could put pressure on government bond yields, putting pressure on banks in Italy and Spain, which are particularly exposed to sovereign debt.

Milan's FTSE MIB and Madrid's IBEX blue-chip equity indexes fell 10.4 and 11.4 percent, underperforming the wider slump and putting them on track for their sharpest one-day drop ever.

Europe's bank sector index fell 15 percent, making it the biggest sectoral faller so far, also weighed down by concerns over the fallout of the UK vote on a regional economy already struggling with low growth.

Spanish lender Santander, which has a meaningful UK exposure, fell 20 percent, while Italy's UniCredit and Intesa Sanpaolo both down by a similar amount.

UK banks Barclays, Royal Bank of Scotland  and Lloyds plunged between 19 and 21 percent.

European insurers were down 10.3 percent, while auto shares fell 8.7 percent.

Gold producers Randgold Resources and Fresnillo rose 19 per cent and 12 per cent respectively on expectations that gold, seen as a safe-haven asset, will rise further.

Quitting the EU could cost Britain access to the EU's single market and mean it must seek new trade accords with countries around the world.

The United Kingdom itself could break apart, with leaders in Scotland - where nearly two-thirds of voters voted to stay in the EU - calling for a new vote on independence. — Reuters 

 

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