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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2pm) and Nick Fletcher

Pound and shares rally after two days of record Brexit losses – as it happened

Video: Richard Branson: Virgin Group lost a third of value since Brexit vote

European markets end higher

The volatility suffered by stock markets in recent days is unlikely to ease in the near future. The day saw a rebound following the sharp declines which came in the immediate aftermath of the Brexit vote, but the City is reluctant to bet too strongly on where markets go from here. Laith Khalaf, senior analyst at Hargreaves Lansdown, said:

It would be premature to call the bottom of the market, prices are still adjusting to the post-Brexit world, and it would be foolhardy to rule out further price swings.

The bounce in the Footsie does show there are buyers out there who are swooping in when prices fall sufficiently, but markets neither go up, or down, in a straight line, and things may yet have to get worse before they get better.

Valuations on the UK stock market look in the middle of their historical range, which suggests it’s a reasonable time to put money in the market if you are a long term investor. But given the current volatility, you need to be willing to stomach further price falls, if you are dipping a toe in.

The final scores showed:

  • The FTSE 100 finished up 2.64% or 158.19 points at 6140.39
  • Germany’s Dax added 1.93% to 9447.28
  • France’s Cac closed 2.61% higher at 4088.85
  • Italy’s FTSE MIB rose 3.3% to 15601.62
  • Spain’s Ibex ended up 2.48% at 7835.0
  • In Greece, the Athens market added 3.72% to 538.65

On Wall Street, the Dow Jones Industrial Average is currently up 148 points or 0.87%.

As for the pound, it is now up 0.9% at $1.3342 after climbing as high as $1.3418. Against the euro it is 0.68% higher at €1.2075.

On that note, it’s time to close up for the day. Thanks for all your comments, and we’ll be back tomorrow.

ECB president Mario Draghi has said Brexit could reduce European GDP by up to 0.5 percentage points, according to a document seen by Bloomberg.

Updated

Here’s the full Reuters report on the meeting between business leaders and government minister Sajid Javid:

Britain appears a long way from developing a clear plan on the country’s future trading relationship with the European Union, the head of the Confederation of British Industry (CBI) said on Tuesday after a meeting with government.

CBI Director-General Carolyn Fairbairn said some firms were putting investment on hold after Britain’s vote to leave the EU last week, and that they needed a clearer sense of what the government intended to do.

“It’s incredibly early days. I don’t think anybody’s coming out of these meetings feeling great, but they are coming out with a sense of resolve,” she told reporters.

“We’re a long way off having a plan and leadership and that is still where we will be continuing to make (the point) that this is what businesses need,” she added.

Fairbairn said businesses expressed very high levels of real and genuine concern to business minister Sajid Javid, who had called the meeting, and that the government also needed to address the fears of EU migrants employed in Britain.

At the meeting between business leaders and the government, there were high levels of real concern following the Brexit vote according to the CBI.

Reuters reports the CBI saying that the government needed to develop a plan on the country’s trading relationship with the EU very quickly. Businesses also wanted the government to get on with major infrastructure projects which are already underway. There were also concerns about rising prices, housing, and the insecurity being felt by migrant workers in the UK.

The CBI director general said a number of firms had put investment on hold, said Reuters, and said the meeting did not feel great but there was a sense of resolve.

Updated

After two days of panic leading shares have regained a little of the lost ground. Joshua Mahony, market analyst at IG, said:

Today has seen a welcome reprieve from the incessant fear and risk aversion that has dominated financial markets since Friday’s unexpected referendum result. The question on everyone’s lips is whether we have seen an end to the selling, with many seeing current prices as an opportunity to buy their favourite firms at a temporary discount. [But] this selloff is unlikely to be over and perhaps the only thing that will truly raise risk appetite for good will be a faint glimmer of hope that we could see a second referendum.

Despite the binary nature of Friday’s referendum result, far from providing a definitive answer to the markets, we now find ourselves in the eye of a political and economic storm. We have moved from a position of security and stability, to one where we do not even know who will lead the two main political parties in a year’s time. David Cameron may have said that there is no way to go back on the referendum result, but Jeremy Hunt’s suggestion that he would hold a second referendum reminds us that crucially the decision is no longer Cameron’s to make.

UK business secretary Sajid Javid says maintaining single market access will be his number one priority in negotiations with the EU. He says British access to the single market may not take the same form as other non-EU countries. He says the UK economy remains strong and over the past few days investors have reaffirmed their commitment to the UK.

Javid also said that a package of support for a potential buyer of the Port Talbot steel works was still available.

Updated

US banks with significant UK operations are likely to act sooner rather than later to shift their operations, according to ratings agency Fitch. It said:

The UK’s decision to leave the European Union will be disruptive for US global banks with significant operations in the UK and will weigh on their profitability in the short to medium term, Fitch Ratings says. However, the impact is likely to be moderate as we believe they will be able to operate through other EU legal entities.

US global banks are likely to start strategically implementing parts of their contingency plans rather than wait for trade and service arrangements to be agreed. Resolution planning for US global systemically important banks was constructive for their Brexit contingency planning because of the requirement to rationalize and understand their global legal entity structure and activities.

Restructuring operations will depend on license status in various jurisdictions, as well as establishing operational scale, potentially reallocating capital and relocating where trades and clients are booked. Relocation of staff is likely to follow; for example, ahead of the referendum, JP Morgan had announced that as many as 4,000 of its UK roles could be shifted out of the country.

Management will have to decide where to focus its European operations, depending on language requirements, staff expertise and incentives offered by these countries. Flexible labor laws will be important for US firms, so this may favor countries like Ireland and the Netherlands, rather than Germany and France.

After cutting the UK’s credit rating from AAA to AA, Standard & Poor’s has said it had no plans to downgrade any other EU country in the wake of the Brexit vote.

But it said it would decide whether any UK bank ratings should be cut in the coming weeks. Reuters reports:

“This does not lead to mechanical changes (in bank ratings),” S&P banking sector analyst Giles Edwards said on a webcast.

“But equally this (Brexit scenario) was not our base case... where we see a need to change ratings we will do so in the coming weeks.”

On other EU sovereign ratings, S&P’s global sovereign chief Moritz Kraemer said: “We have no intention of downgrading any other EU sovereign.”

S&P chopped the UK’s credit rating by two notches to AA and kept it on a ‘negative outlook’ on Monday in the wake of last week’s vote to leave the European Union. It was the first time it had ever made such a deep cut to a top-rated sovereign.

Here’s a link to video of Greek prime minister Alexis Tsipras arriving earlier at the European Council, warning the Brexit vote was a wake up call for Europe:

Updated

More Brexit fallout. Siemens is putting new wind power investment plans in the UK on hold due to uncertainty caused by last week’s Brexit vote, the Germany energy company has told the Guardian. Arthur Neslen reports:

A £310m manufacturing hub in Hull that employs 1,000 people will not be affected by the decision, and should still begin producing blades and assembling turbines next year.

But Siemens, one of the few firms to openly back a Remain vote, will not be making new investments until the future of the UK’s relationship with Europe becomes clearer.

Juergen Maier, the firm’s UK CEO, said that an existing blueprint to export offshore wind turbine machinery from the Hull hub was now up in the air.

Sign up to our EU referendum morning briefing Read more

He said: “Those plans were only beginning to happen and I expect that they will stall until we can work out exactly what the [new government’s] plan is, how we can participate in EU research programmes, and until all the issues around tariffs and trade have been sorted out.”

The full report is here:


After higher than forecast US GDP figures, comes a better than expected consumer confidence number.

According to the conference board, the consumer confidence index came in at 98 in June, compared to 92.4 in the previous month and an expected 93.3. (This was before the outcome of the UK referendum of course.)

But there was a weaker manufacturing survey from the Richmond Federal Reserve:

Updated

Earlier UK chancellor George Osborne suggested taxes would have to go up to address the economic damage caused by Brexit.

So what taxes would they be? VAT could be one, according to tax specialists at Eversheds. The law firms partner Ben Jones said:

If tax rises are required, ironically VAT (the only real European tax and a prerequisite for EU membership) could be the tax most likely to increase. VAT is a huge source of tax revenue and relatively easy to increase, both practically and politically. Indeed, during the financial crisis of 2008 and after, VAT was increased from 17.5% to 20% as part of measures to tackle the fiscal deficit. Increases to income taxes, national insurance contributions or business taxes would most likely be far more publically unpopular and politically undesirable.

VAT could rise
VAT could rise Photograph: stocknshares/Getty Images

And here’s the Greek prime minister on the lesson from Brexit as he arrives at the European Council:

Updated

Back with the European parliament:

Wall Street opens sharply higher

In tandem with other global markets, which have recovered a small part of the hefty declines seen in the wake of last week’s Brexit vote, the US has moved higher in early trading.

The Dow Jones Industrial Average - down almost 900 points since the referendum outcome - has gained 144 points or 0.8% as bargain hunters dip their toes into the market. The S&P 500 has opened up 0.7% and Nasdaq 1.1%.

Representatives of several industries are due to meet business minister Sajid Javid MP this afternoon for a summit on the potential impact of the Brexit vote on UK firms, writes Rob Davies.

Food and Drink Federation director general Ian Wright will warn Javid that the industry faces a huge staffing shortfall if EU citizens are blocked from working in the UK.

“The UK food industry has almost 100,000 workers from the rest of the EU. We have an emerging gap of up to a further 130,000 workers as our ageing staff retire over the next decade,” he said in a prepared statement.

“While we as an industry continue to take many steps to develop home-grown talent through ambitious graduate and apprenticeship programmes, EU workers also provide a highly valued solution to our skills gap.

“The UK food industry benefits from bringing in skilled labour from the EU and we urgently need assurances from UK Government that EU nationals working in the UK will be granted leave to remain. UK Government must now develop a new migration policy that ensures food and drink manufacturers have continued access to the workers we will need to address a looming skills gap and the drive for future innovation to support our UK competitive advantage.”

Here’s a video of Richard Branson discussing his Brexit concerns on Good Morning Britain:

Richard Branson: Virgin Group lost a third of value since Brexit vote

Lloyds Banking Group is the latest to try and reassure on the consequences of Brexit, following rival Royal Bank of Scotland earlier.

Lloyds chief executive Antonio Horta Osorio has written to staff telling them the bank had “robust plans in place for either outcome”, according to Reuters. He said its strategy would remain unchanged and its low risk lending approach and historic brands put it in a position of strength to “weather turbulence in our sector and the wider market.”

Europe’s major stock markets have all risen today
Europe’s major stock markets have all risen today Photograph: Sky News

Pound and shares are rallying higher

The pound is accelerating higher. It’s now gained almost two cents to $1.341, a jump of 1.5% today.

Shares in London are also pushing higher, as the City recovers some poise following two days of Brexit panic.

The FTSE 100 index is now up 175 points, or almost 3%, at 6157. That means it has clawed back ALL of Monday’s losses.

FTSE 100 top risers today
Biggest risers on the FTSE this morning Photograph: Thomson Reuters

Investors are piling back into financial stocks, perhaps reassured that banks only took £3bn in liquidity from the Bank of England this morning

Connor Campbell of SpreadEx says:

The main change from yesterday to today seems to be the performance of the banks. Accepting around £3 billion in a Bank of England liquidity auction this morning, the UK’s banking sector is looking a bit rosier after having the colour completely drain from its face at the start of the week.

Barclay, Lloyds and RBS are the key stocks here; the trio suffered the most in the aftermath of Friday’s Brexit announcement, diving up to 30% in the last 2 days of trading.

Today, however, they have risen anywhere between 4% and 6%; a long way off from recapturing all of their losses, but a start nevertheless.

But given the political turmoil in the UK, and the uncertainty over when (or indeed ever?) Britain will trigger Article 50, there may be more volatility ahead....

Updated

Newsflash from America: The US economy grew faster than expected in the first three months of this year, in some much-needed good news.

US GDP grew at an annual rate of 1.1%, a little faster than expected, and means a quarterly rate of almost 0.3%,

It’s up from a previous forecast of just 0.8% annualised growth (or 0.2% quarter on quarter).

Britain’s Prime Minister Cameron arriving at the EU Summit in Brussels

Over in Brussels, European leaders are gathering for a summit dominated by Britain’s Brexit bombshell.

Prime minister David Cameron just arrived, telling reporters outside that he is seeking the “closest possible relationship” between the UK and the EU.

He also insists that the leaving process must be constructive; European countries are still our friends, our neighbours and our allies.

Cameron was followed into the EU headquarters by Mark Rutte, the Dutch prime minister, who had a scathing verdict on the UK:

Our Politics liveblog will be tracking the action in Brussels:

Updated

After two days of heavy falls, Wall Street is expected to rally today. Trading begins in 90 minutes.

Ireland isn’t the only European country which would suffer from Brexit.

Fitch says that:

The most exposed countries are Ireland, Malta, Belgium, the Netherlands, Cyprus and Luxembourg, all of whose exports of goods and services to the UK are at least 8% of GDP.

And if Britain does well outside the EU, other member states could follow, Fitch adds...

Brexit will create a precedent for a country leaving the EU and we believe it increases political risk in several ways. It could boost anti-EU or other populist political parties, and make EU leaders more reluctant to implement unpopular policies that would have long-term economic benefits.

Ireland’s finance minister, Michael Noonan, says he hopes that the Republic can avoid being hurt by Brexit.....

Fitch: Ireland could be downgraded over Brexit

The Irish flag.

Rating agency Fitch has issued a warning that the Republic of Ireland could be downgraded because of the economic cost of Britain leaving the EU.

It warns that Ireland is ‘highly exposed’ to the UK economy, given the strong trade links, so any Brexit slowdown could have a serious impact.

However, the Irish credit rating is probably safe in the short term, at least.

Here’s the full statement:

The UK vote to leave the European Union is negative for Ireland, raising risks to growth and creating uncertainty around future relations with Northern Ireland, Fitch Ratings says. It is unlikely to have any immediate implications for Ireland’s sovereign rating in the near term, but a medium-term rating impact would be possible if the economic dislocation of Brexit were to prove severe.

Ireland’s economy is highly exposed to Brexit. According to the Central Statistics Office (CSO), the UK accounted for 12.6% of Ireland’s total goods exports in January-April 2016, and 24% of total goods imports. The UK also accounted for 20% of total services exports in 2014. Total goods and services exports to the UK are equivalent to around 17% of GDP. There could be significant sector-specific fall out. For example, the UK accounts for 49% of Irish agricultural exports.

A UK slowdown, sterling depreciation and potential future trade barriers between Ireland and the UK would weigh on Irish exports, economic growth and employment; although the full impact will only become clear as EU-UK negotiations develop. We think the most important near-term impact will be through reduced domestic confidence.

In the medium term, Ireland could gain from a shift of some foreign direct investment from the UK to the EU or from international businesses relocating from the UK, but this is highly uncertain.

Fitch also warns that political tensions between the Republic and Northern Ireland could rise (on Saturday, Sinn Féin’s Martin McGuinness, deputy first minister for Northern Ireland, called for a poll on reunification)

Brexit would represent a symbolic moving apart of the UK and Ireland that could weaken confidence in the peace process in Northern Ireland and potentially impair cross-border relations and trade.

Ireland’s minority government, which was formed in May after February’s inconclusive election, has outlined its ‘Contingency Framework’ that will guide its policy response. This identifies priorities including UK-EU negotiations, UK-Irish relations, trade and investment, and Northern Ireland. It remains to be seen how effective this will be, and some domestic political uncertainty persists given the relatively loose agreement between Fine Gael and Fianna Fail.

Lower economic growth would reduce the tax intake, reducing the medium-term fiscal space that the government identified in its recent Summer Economic Statement. Ireland’s commitment to fiscal consolidation during and after its EU-IMF programme leads us to think an increase in fiscal risks would be met with a policy response to continue meeting fiscal targets and limiting the impact on public debt dynamics.

Our upgrade of Ireland to ‘A’ from ‘A-’ in February reflected the marked fall in government debt to 93.8% of GDP in 2015 from 120% in 2013 driven by strong and broad-based growth and fiscal consolidation. While negative, Brexit is unlikely to undermine the progress that Ireland has made in these areas. Fitch expects debt/GDP to fall in the medium term, helped in part by lower nominal interest rates.

Updated

Pound up, but analysts cautious

The pound is clinging onto its early gains this morning, as stability returns to the City.

Sterling is still up around 1.1 cents today, at $1.3334 against the US dollar.

That’s still close to yesterday’s 31-year low, and a long way from the pre-referendum levels:

Caxton FX analyst Nicholas Laser-Ebisch warns that sterling’s problems aren’t over:

Today will see the very first EU summit where leaders of all of the EU’s 28 member states will meet in Brussels for a first exchange about the British referendum and the consequences involved.

We can expect the pound to remain under pressure for the time being as markets come to terms with the result of Friday’s referendum vote.

Stephen King, HSBC’s chief economist, also sees the pound falling:

Bank of England hands out £3bn in liquidity to the City

Newsflash: UK banks have taken £3bn of liquidity from the Bank of England in a special auction.

That money is meant to help them handle the repercussions of the Brexit vote last week.

This is the third such auction - last week, banks only took £370m, and the previous week they took £2.4bn.

If there were massive stresses in the City now, presumably banks would have asked for rather more money.

The BoE says that it received bids for over £6bn, but banks were offering relatively low-quality assets as collateral, so many bids were turned down.

Updated

Branson: Chinese investors pulling out of UK over Brexit vote

‘Good Morning Britain’ TV show, London, UK - 28 Jun 2016EDITORIAL USE ONLY. NO MERCHANDISING Mandatory Credit: Photo by Ken McKay/ITV/REX/Shutterstock (5737705bc) Richard Branson ‘Good Morning Britain’ TV show, London, UK - 28 Jun 2016

Virgin tycoon Sir Richard Branson has warned that Chinese business partners are already pulling investment from the UK after the EU referendum.

Speaking to The Guardian, he warned that last week’s historic vote will cost “thousands of jobs”.

Branson told my colleague Rob Davies that:

“I met with a group of Chinese businessmen yesterday morning who have invested heavily in England and who are now going to stop investing and withdraw investments they’ve already made.”

“I’m afraid that based on misinformation, people voted for Brexit, which is basically voting for a way of shooting themselves in the foot. The last 2 days has been absolute pandemonium worldwide in the markets, the pound crashing, the stock markets crashing, and we are heading rapidly towards a recession again. It’s just too sad, so so sad.

Branson also laid into the Leave campaign for misleading voters during the referendum campaign, saying “thousands and thousands” of workers will pay the price.

“Businesspeople do not want politicians to completely and utterly wreck the hard work they’ve done for years and years and that is effectively what happened. Thousands and thousands of jobs will be lost as a result of this. Thousands of jobs that would have been created will be lost and the knock-on effect will be so dire.

“The sad thing is I really think Brexiters were misled and did not realise.

People said it was scaremongering. It wasn’t scaremongering and the last 48 hours have proved that.”

As mentioned at 8.50am, Branson is pushing for a second referendum vote.

Branson’s Virgin Money challenger bank has been badly hit by the referendum result, with shares tumbling by 40% since Friday morning.

Updated

A branch of the Royal Bank of Scotland.

The boss of Royal Bank of Scotland has written to staff, warning that the EU referendum decision has created “short, medium and longterm” economic uncertainties, according to Reuters.

New Zealand-born Ross McEwan told staff that RBS was well-prepared, and also urged them to support diversity in the workplace:

“As someone born outside the UK, I see one of this country’s biggest strengths as its openness to the rest of the world, and the people of it. As a major employer and backer of the economy we have a duty to ensure that we reflect that..

“The diversity of those who make up this bank at every level is key to our success. In uncertain times I want to ensure that everyone understands that.”

Shares in RBS have risen by 3% this morning, but are still down by roughly a quarter since the referendum polls closed. At 180p, they are far from the 502p level where the taxpayer would sell its 72% stake without making a loss.

George Osborne has also ruled himself out of becoming the next prime minister.

There has been speculation that he could back Leave campaigner Boris Johnson, perhaps in return for becoming foreign secretary. Home secretary Theresa May is also seen as a frontrunner, though.

Osborne: Britain will be poorer

Chancellor George Osborne has predicted more market turbulence, as Britain faces up to life outside the European Union.

Speaking on Radio 4’s Today programme this morning, he said:

We are in a prolonged period of economic adjustment … it will not be as economically rosy as life inside the EU. It’s very clear that the country is going to be poorer as a result of what is happening to the economy.

Osborne also warned that Britain faces higher taxes, and lower spending, to address the economic damage caused by the Brexit vote.

Our Politics Liveblog has full details:

Updated

Two major British companies, engine maker Rolls-Royce and the insurer Legal & General, have tried to shareholders that the UK referendum result won’t sink their operations.

Rolls-Royce told the City this morning that its outlook is unchanged, while L&G argues that the long-term trends in insurance are unchanged....

Germany’s financial newspaper, Handelsblatt, is predicting a surge of banking jobs into Frankfurt from the City.

Ocado: Expect more inflation

An Ocado home delivery van

Online grocer Ocado has warned that the recent slump in sterling is likely to sent supermarket prices soaring.

Chief executive Tim Steiner said the weaker pound may lead to “inflationary pressure”, but also told shareholders that he doesn’t believe Brexit will cause a sudden crash in the UK retail market.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, predicts that inflation will hit 3% next year, over the UK’s 2% target. That’s because it will cost more to import goods from abroad.

Updated

Kit Juckes, currency expert at French bank Societe Generale, isn’t impressed by the pound’s small rally this morning (to $1.335 from $1.32 last night)

He is still worried about the political vacuum in Britain:

Markets are bouncing, and can bounce further but the clouds on the horizon are dark, and they’re real.

Sterling can bounce to $1.35 for example- but the UK has no Government and no plan for the future.

Billionaire businessman Sir Richard Branson has called for a second EU referendum this morning.

Speaking on ITV’s Good Morning Britain, he also revealed that his Virgin Money operation has abandoned a deal, since Britain voted for Brexit....

Is a second referendum possible?

Well, it’s not unprecedented in European politics.

And this morning, government minister Jeremy Hunt suggested that the next Prime Minister must be allowed to “negotiate a deal” with Brussels and “put it to the British people” by either calling a general election or having another referendum.

However, Brexit supporters are unlikely to welcome the idea of a rerun...

One rally doesn’t mean the Brexit crisis is over, remember....

It may seem curious that shares in London are rising, hours after Britain lost its AAA credit rating.

But Tony Cross, market analyst at Trustnet Direct, reckons S&P’s downgrade may actually be encouraging investors back into the market.

It still seems as if we’re a long way from the dust settling, but the FTSE-100 is starting Tuesday’s session with a triple digit bounce. Yes we’ve seen three ratings downgrades for the UK overnight, but taking a glass-half-full perspective, this also means that just a little of the uncertainty is starting to ebb away.

Some stocks have taken a while to clear the auction, but this is a case of bargain hunters clamouring to get in.

And there could be bargains on the table, if you think Brexit won’t cause economic mayhem.

Take housebuilder Persimmon, for example. Its shares are up 7% at £14.07. Last Thursday, they cost £21 each....

The French and German stock markets are also up by around 2% this morning, matching the recovery in London.

FTSE 100 rises in early trading

European stock markets are rallying at the start of trading, after two days of big falls.

In London, the FTSE 100 has jumped by 125 points, or around 2%, to 6,109 - recovering some of yesterday’s losses.

The FTSE 100 over the last few days
The FTSE 100 over the last few days Photograph: Thomson Reuters

Every share has risen, led by builders – who endured the brunt of the Brexit backlash.

Top risers on the FTSE 100 this morning
Top risers on the FTSE 100 this morning Photograph: Thomson Reuters

Mike van Dulken and Augustin Eden at Accendo Markets reckon that the markets may be calming down, pointing to the small recovery in the pound overnight.

Sterling is strengthening for the first time since Friday’s surprise referendum result on hopes policymakers are working to limit the economic fallout

Over in Asia, governments are considering whether to launch new stimulus packages to protect their firms from the consequences of Brexit.

From Toyko, Justin McCurry explains:

Japan’s economy minister, Nobuteru Ishihara, said on Tuesday that stimulus measures were likely to include assistance for small businesses.

“There are concerns about lessening the impact of the British referendum on Japan’s small and medium-sized companies,” Ishihara said.

“Taking steps to provide liquidity to small firms could be a big factor in economic stimulus steps that we compile.”

The Brexit shock has left UK companies worried about losing sales from overseas clients.

Our North of England editor, Helen Pidd, flags up that one small business is already seeing demand dry up:

After two days of intense pummelling, the British pound is clambering off the mat this morning.

Sterling has gained almost one cent against the US dollar so far today, to $1.3303.

Yesterday it hit a 30-year low of $1.3118, so it’s a small recovery (given the pound was worth $1.45 last week).

Updated

Brexit sparks biggest 2-day global stock rout in history

Traders from ETX Capital work in central London yesterday
Traders from ETX Capital work in central London yesterday Photograph: Daniel Leal-Olivas/AFP/Getty Images

Global stock markets have suffered their biggest two-day rout ever, thanks to Britain’s shock decision to vote to leave the EU.

Yesterday, $930bn was wiped off the world’s stock markets, in a fresh bout of selling. That followed the rout on Friday, which destroyed $2.03 trillion of value.

Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, explains that American investors are increasingly worried about the crisis, and its impact on their economy.

“Friday was seen as a U.K. – E.U. problem, with the U.S suffering some damage on the side lines – Monday’s global declines paint a more involved U.S. participation.”

The bottom-line is we may still be in the knee-jerk reaction phase, but continued deterioration can feed on itself.”

S&P’s Global Broad Market index, known as the BMI, has fallen almost 6.9% since Thursday night, its biggest loss in cash terms ever.

The scale of the loses shows how unprepared investors were for the Leave campaign’s surprise victory in the early hours of Friday morning.

In Britain, the FTSE 100 has fallen by over 5% over the last two days, with bank shares sliding to their lowest levels since the 2008 financial crisis.

America’s S&P 500 index, the broadest stock index, has lost 5.37% -- in its worst two-day decline since last August.

Introduction: Markets still gripped by EU fears

Good morning.

Like the average England football fan this morning, the financial markets are in a gloomy and dejected mood.

The shock of seeing the UK vote to leave the European Union last week continues to reverberate around the global economy, with economists fearing that global growth will take a hit.

Last night, Standard & Poor’s and Fitch both downgraded Britain’s credit rating to AA, two notches below the top AAA rating, warning that growth will be significantly weaker than previously expected.

That only adds to worries about the UK economy, which have sent shares in banks and building companies reeling since Friday morning.

After two days of heavy falls, European stock markets are expected to claw back some losses this morning. The FTSE 100 is predicted to rise by around 1%.

But investors should be cautious in the current climate; there is just too much uncertainty around

The Bank of England is doing its bit to stem the crisis. Later today it will offer UK banks the chance to stock up on liquidity to help them through the Brexit crisis, in a special liquidity auction. That will show how worried the City is about financial conditions.

It’ll be a busy day in politics too, with David Cameron slinking off to Brussels to face fellow leaders for the first time since his referendum gamble backfired - taking his career with it. He’ll leave behind a cabinet full of scheming ministers, wondering who might become the next prime minister.

But the opposition Labour party is doing its best to match the Tories in the shambles stakes, with scores of MPs trying to dislodge their leader. Jeremy Corbyn is gripping his seat tightly, though, and promising to go nowhere.

Our Politics Liveblog will have all the action in Westminster and Brussels:

Updated

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