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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden and Nick Fletcher

Brexit panic wipes $2 trillion off world markets - as it happened

Mark Carney seeks to reassure financial markets after Brexit

Closing summary: Brexit wipes $2 trillion (!!) off global markets

It’s almost 24 hours since it first became clear that David Cameron’s EU referendum had not gone as the PM had planned.

That realisation has triggered one of the most dramatic, volatile and downright scary trading sessions in the last decade. New estimates tonight say Brexit has wiped out over two trillion dollars of value, worldwide:

So, as City traders hit the pillow (or in some cases the gin bottle), we should also wrap up.

Here’s a very brisk summary of the state of play.

The British pound has suffered its biggest one-day selloff in recent history, as the shock news the the UK is heading out of the European Union sparked panic in the markets.

Sterling suffered a jaw-dropping plunge in the early hours of Friday in London, from $1.50 against the US dollar to just $1.33. It closed at $1.368, after a day to forget for many FX traders.

A trader from BGC, a global brokerage company in London’s Canary Wharf today.
A trader from BGC, a global brokerage company in London’s Canary Wharf today. Photograph: Russell Boyce/Reuters

The London stock market suffered steep losses at the open, but recovered to finish down 199 points or minus 3.1%. Bank stocks suffered badly, while some housebuilders shed a quarter of their value amid forecasts of a UK recession.

The morning stopped being dramatic, and was upgraded to historic, at 8.15am London time when the prime minister resigned,

And that left central bankers (once again) to pick up the pieces. The Bank of England, the European Central Bank and the Federal Reserve have all promised to flood market with new liquidity, if needed, to prevent the Brexit shock turning into a new financial crisis.

But that wasn’t enough to stop France’s CAC sliding by 8%, or Wall Street suffering its biggest one-day fall in 10 months.

Asia had already tumbled while results from across the UK had flooded in, with Japan’s Nikkei index experiencing its biggest fall since the Fukushima disaster of 2011.

And then Moody’s fired a warning shot at Britain, cutting its rating outlook to negative due to the economic problems caused by Brexit.

Britain also faces a political crisis tonight, of course, plus pressure from Europe to actually start the exit process..

Saturday is going to be another dramatic day in the UK. Ditto Sunday. And then the markets reopen on Monday morning....

So until then, a very good night!

World Markets routed
World markets today Photograph: Thomson Reuters

Updated

The record 8%-ish slump in the pound on Friday has raised fears that UK inflation could spike (as imports will cost more).

That would be bad news for poorer citizens, says the IPPR thinktank tonight.

Using Treasury modelling of currency shocks, IPPR finds that a 2.3 percent increase in CPI will increase costs for the poorest households by 3.3 per cent, compared to a 1.6 per cent increase for the richest 10 percent of families.

This chart shows how those with less money suffer more from rising living costs:

IPPR

It’s 15 short (?!) hours since London’s stock markets opened, in a massive wave of selling that briefly wiped 550 points off the FTSE 100.

Our Jill Treanor and Simon Goodley were watching events unfold in the City, while we stared open-mouthed at our Reuters terminals in the news room.

Here’s their report on the action:

And here’s a flavour of a truly wild day...

On the dealing room of the financial trading firm IG, clients were calling in a state of near panic. One, who had a profitable position on Barclays shares when the market closed on Wednesday night, was now not only in the red but facing the indignity of being asked to deposit more cash into his account.

Another told his dealer it was the end of the world.

By 7am Chris Beauchamp, IG’s chief market analyst, was worrying about the effect on markets if the prime minister, David Cameron, did not hold on to his job until the afternoon.

“Sterling now will depend on the shape of the UK government at about 4pm and if Cameron is still there,” he said. “If he says he’s going it will be sold off again. The best thing he can do is hold the line here. We also have Spanish elections this weekend. To lose one government would be unfortunate. To lose two would be careless.”

Germany’s Bild says Britain’s decision is a Black day for Europe:

Bild had made a last-ditch attempt to sway UK voters, promising to reserve sun loungers for Brits, and even recognise Geoff Hurst’s ‘on-the-line’ goal at the 1966 World Cup. To no avail.

(anyway, it was definitely a goal, the Russian linesman said so)

Merci, guys, I think we’ll need it.....

Moody’s also warns that Britain’s trade with the rest of the world is probably going to suffer.

That’s another reason for downgrading the UK’s outlook to negative tonight.

Moody’s says:

Moody’s expects a negative impact on the economy unless the UK government manages to negotiate a trade deal that largely replicates its current access to the Single Market.

However, at the moment there is substantial uncertainty over the type of trade agreement that could be achieved.

Moody's cuts outlook on UK debt to negative

Breaking news: Moody’s, the credit rating agency, has just lowered the outlook on Britain’s credit rating to negative from stable.

It says that Britain’s economic growth will be weaker, following the EU referendum vote. It also warns the the public finances will be weaker than previously forecast, meaning it will be harder to cut the deficit.

Moody’s says that the Brexit vote will herald a “prolonged period of uncertainty” for the UK, with negative implications for growth in the medium terms.

And it also warns that the effectiveness of economic policymaking could be ‘somewhat diminished’ by the decision.

A negative outlook means there is a greater danger of a country being downgraded.

It’s three years since Moody’s cut Britain’s AAA rating. It currently has the UK on AA+, the second highest rating.

This morning Standard & Poor’s, the only firm that Britain still on triple-A, warned that it is likely to downgrade Britain.

Updated

Here’s Dominic Rushe and Sam Thielman’s report on Wall Street’s selloff:

Updated

Wall Street suffers biggest fall in 10 months

DING DING. The closing bell has rung on Wall Street, leaving shares deep in the red.

The Dow Jones index has slumped by 608 points, or nearly 3.4%, at 17,402. Almost every share lost ground, with financial stocks worst hit.

The S&P 500, the broadest index of US stocks, tumbled by 76 points or 3.6% to 2,037 points.

That’s its biggest one-day fall in 10 months, since global markets were hit by fears ove the Chinese economy in August 2015.

The Nasdaq has been thumped hard too:

A wild day in the markets is nearly over....

America’s former top central banker, Alan Greenspan, suggests the City could lose its preeminent place in the world economy:

Trading in the British pound hit unprecented levels today, according to the FT’s Gregory Meyer:

We’re biased, I guess... but this is a great front page.

More to come tonight, of course....

The Institute for International Finance have sent some nice charts, showing the slump in world markets today....

The global market selloff

...and showing how the British pound (GBP) is the worst performing currency today.

World currencies

The IIf says:

The unexpected Brexit win by a solid margin (51.9% to 48.1%) has cascaded across international financial markets.

The GBP has taken an unprecedented one-day hit, taking it down to levels against the dollar last seen in the mid-1980s. Other risk assets, including the euro, EM currencies, global equities (although less for the US), and most commodities (except for gold) have also fallen sharply amid elevated volatility.

Financial markets need to get used to a lot more volatility, following Britain’s decision to leave the EU.

Peter Kenny, senior market analyst for Wall Street firm Global Markets Advisory Group, says:

“This bleeds through the EU narrative in terms of its unity and its popularity,”

Kenny said the unease in the markets would likely keep the Fed from raising rates in the short term, and in the long term the consequences would be far-reaching.

Right now, Kenny said, the IMF and other international banks have to “play defense” as they tries to calm down markets – Kenny pointed to the IMF’s conference call last week in which it played down the chance of market downturns across multiple regions.

But the fact is that those markets will be uneasy for a long time to come.

“[That volatility] is something the market’s going to have to transition from thinking of as a variable to something it thinks of as a constant.”

No surprise what our friends at the Financial Times have splashed on, for tomorrow’s edition:

There are some anxious faces on Wall Street today, as shares are hit by the Brexit shock:

Trader Kevin Walsh, second from right, works on the floor of the New York Stock Exchange, Friday
Trader Kevin Walsh, second from right, works on the floor of the New York Stock Exchange, Friday Photograph: Richard Drew/AP
A trader talks on the phone as he works on the floor of the New York Stock Exchange (NYSE) in New York, U.S
A trader talks on the phone as he works on the floor of the New York Stock Exchange (NYSE) in New York, U.S Photograph: Lucas Jackson/Reuters

The economic turmoil which the UK referendum could trigger could make it very hard for the US central bank to raise interest rates this year.

Here’s John Praveen, chief investment strategist of Prudential International Investments:

Wall Street foreign exchange analyst Marc Chandler believes the pound will keep sliding in the weeks ahead:

Obama: special relationship will endure

U.S. President Barack Obama speaks about Brexit at the Global Entrepreneurship Summit at Stanford University in Palo Alto, California, today.
U.S. President Barack Obama speaks about Brexit at the Global Entrepreneurship Summit at Stanford University in Palo Alto, California, today. Photograph: Kevin Lamarque/Reuters

Barack Obama, president of the United States, has declared that America’s ‘special relationship’ will survive the EU referendum result.

He also argued that the Brexit vote is part of a broader picture, of the ‘ongoing changes and challenges’ raised by globalisation.

Reuters has the story:

U.S. President Barack Obama said on Friday that he had spoken with British Prime Minister David Cameron about Britain’s decision to leave the European Union and that he was confident the United Kingdom was committed to an orderly transition.

“While the UK’s relationship with the EU will change, one thing that will not change is special relationship that exists between our two nations,” Obama said in a speech at a global entrepreneurs conference at Stanford University.

“That will endure. The EU will remain one of our indispensable partners.”

During the referendum campaign, President Obama warned that Britain will be at the ‘back of the queue’ for a US trade deal, if it quit Europe. Voters didn’t heed that warning, so now we must wait to see how negotiations play out.

The Paris-based OECD economic thinktank had warned, repeatedly, against voting for Brexit - predicting that families would be hit in the pocket.

But now the deed is done, it wants to help Britain through the difficult times ahead:

OECD Secretary-General Angel Gurría says:

“Yesterday’s vote on the United Kingdom’s membership of the European Union has major consequences for the UK itself, the EU and the international community. While it is on the public record that this was not the OECD’s recommended course of action, the focus must now shift to dealing with the outcome of this democratic process.

The OECD will spare no efforts in supporting the Government of the United Kingdom to make the transition as smooth as possible and advance the country’s economic and social agenda.

The OECD also wants to support the “European project”, as it faces the biggest crisis in its history:

We will also help the European Union and the international community best address the consequences of such a decision and chart the way forward. The OECD believes that openness, integration and diversity will make our economies and societies stronger and fairer. Thus, we will continue to support the European project while further reflecting on how to strengthen well-being and inclusiveness, both within our countries and globally.”

Stock markets across the Americas are deep in the red, from New York to Sao Paulo.

The Dow Jones hasn’t managed to rally, and is down almost 600 points, or 3%.

The tech-heavy Nasdaq is deeper, down 4%, with only three stocks rising.

And the Dow, and the S&P 500, are now negative for 2016.

America’s major stock markets
America’s major stock markets Photograph: Thomson Reuters

Sterling is still being buffeted in late trading in America, trading at a seven-year low.

The pound is currently bobbing around $1.368 against the US dollar, a loss of 12 cents or 8% today. That’s its weakest level since the 2008-09 financial crisis.

That’s a small recovery on the $1.33 we ploughed early this morning, when markets were first reeling from the Brexit news.

But it’s still the pound’s biggest one-day fall ever, and the third biggest slump for any currency in the last 40 years (as we covered at 2pm BST).

This graph, from Reuters’ Eric Burroughs, shows the unprecedented scale of the selloff.

Important point: Although the Footrsie “only” fell by 4%, that doesn’t recognise the 8% tumble in the value of the pound.

One reason shares rallied from their lowest point is that US investors were able to snap up stakes in top UK firms at bargain prices, due to the rallying dollar.

These companies suffered most from Brexit vote

Shares in Britain’s housebuilders slumped by more than a quarter today, as investors anticipated that the UK economy could be dragged into recession.

Taylor Wimpey, Persimmon, and Barratt - three big UK building firms - were the worst-performing major companies in London

Banking stocks, which also track Britain’s economic prospects - and fears of another financial crisis - also suffered heavy losses.

Here are the biggest fallers on the blue-chip FTSE 100 inded, which helped to drag ti down by 199 points or 3.15% today.

Top fallers on the FTSE 100

Some shares rallied though. Gold miner Randgold, and silver maker Fresnillo, both rallied - matching the jump in precious metals prices.

And companies who trade with international markets, such as smartphone chip maker ARM and pharmaceutical firm AstraZeneca, also rose

Top risers on the FTSE 100 today
Top risers on the FTSE 100 today Photograph: Thomson Reuters

Laith Khalaf, senior analyst at Hargreaves Lansdown:, explains:

‘It’s been a roller coaster day on the markets, containing shock, fear and opportunism.

The Footsie started the day in full retreat, but subsequently recovered as investors sniffed a chance to pick up some cheap stocks.

A significant number of FTSE 100 stocks ended the day in positive territory, predominantly those companies with lots of overseas earnings, which stand to benefit from a weaker pound.

In the wake of the Brexit vote, European Council president Donald Tusk has sent a letter to council members ahead of meetings next week. And it will make uncomfortable reading for UK prime minister David Cameron. Here’s a flavour:

I have no doubt that due to the negative outcome of the UK referendum we will mostly need to devote our European Council to a discussion on its political consequences. It is my intention to ensure that we have sufficient space to debate both with Prime Minister Cameron, and then separately with the 27 Heads of State or Government.

And after discussing the agenda for the rest of the meeting, Tusk writes:

We will then move to dinner, where Prime Minister Cameron will explain the situation in the UK after the referendum, followed by a first exchange of views. This will mark the end of our meeting on Tuesday.

And the following day, no invitation for Cameron:

On Wednesday the 27 Heads of State or Government will meet informally to discuss the political and practical implications of ‘Brexit’. First of all, we will discuss the so called ‘divorce process’ as described in Art. 50 of the Treaty. And secondly, we will start a discussion on the future of the European Union with 27 Member States.

European markets slump after Brexit vote

With the uncertain future following the UK vote to leave the European Union, and an 8% fall in sterling against the dollar, investors sold off shares, with banks, housebuilders and airlines hard hit, but gold and silver miners in demand.

Markets came off some of their worst levels, however, as central banks from the Bank of England to the Fed queued up to reassure that they would provide any liquidity that was needed.

And the FTSE 100 outperformed European peers, with exporters in particular helped by the fall in the pound.

In fact the UK index, down 3.15% on the day, is actually up 1.95% on the week, benefitting from its earlier gains when it appeared the Remain camp would win the day.

The final scores showed:

  • The FTSE 100 finished down 3.15% or 199.41 points at 6138.69, but off its low of 5788.74
  • Germany’s Dax dropped 6.82% to 9557.16
  • France’s Cac closed 8.04% lower at 4106.73
  • Italy’s FTSE MIB, as previously mentioned, fell 12.48% to 15,723.81
  • Spain’s Ibex ended down 12.35% at 7787.7
  • In Greece, the Athens market lost 13.42% to 534.78

On Wall Street, the Dow Jones Industrial Average is currently down 508 points or 2.82%, its worst daily performance (so far) since January.

Among the falls in European markets, Italy’s FTSE MIB has slumped by 12.48%, its biggest one day decline since its records began in 1998. Fears that EU members like Italy may hold their own vote was part of the reason, along with a hefty fall in banking shares on renewed concerns about their balance sheets if Brexit leads to another economic downturn.

The Brexit vote is not a Lehmans moment, according to Oxford Economics. It said:

The surprise vote in the UK to quit the EU has seen sharp falls in world financial markets. These reactions are out of line with any likely impact on the UK economy from the vote; markets are instead pricing in a high risk of a broader financial crisis engulfing the rest of the EU. This risk looks exaggerated to us.

Today’s sharp drops in global stock markets and periphery bonds are hard to square with the likely long-term impact on the UK – at worst a few percent of GDP in the long run in an economy that is only 3.5% of world output. Initial market reactions were of similar magnitude to the immediate aftermath of the Lehman Brothers failure in 2008.

It appears markets are pricing in a moderate risk that the UK vote is a systemic event that leads to a political chain reaction in the rest of the EU that collapses the single currency area and/or leads to debt restructuring in the Eurozone ‘peripherals’ – a re-run of the 2011-12 crisis.

The possibility of such a chain reaction has probably gained credence in recent weeks with polls suggesting discontent with the EU in countries such as the Netherlands and Italy. In Italy, as well as a large debt stock there is also the issue of high bad debts at banks as a systemic risk factor.

We think these market concerns are overdone. We do not see a high chance of a systemic crisis in the EU involving other countries exiting the EU quickly or a sovereign debt restructuring – especially as the ECB has the capacity to step in to prevent a runaway rise in peripheral bond spreads, as it did in 2012. We also think the EU could take steps to avoid break-up spreading including by concessions to member states on the migration issue.

Is this good or bad news?

IMF managing director Christine Lagarde has made some more comments about the Brexit vote, calling for clarity over the UK’s negotiations on the terms on which it will leave the European Union.

Speaking at an IMF lecture with China’s central banker, she said she hoped for “as smooth as transition as possible”, according to Reuters.

As European markets head into the close of trading, the FTSE 100 remains well off its worst levels although housebuilders, banks and airlines continue to nurse heavy losses. Chris Beauchamp, chief market analyst at IG,said:

The FTSE 100 has staged a remarkable recovery; from an open of cataclysmic proportions, the index has rallied by over 300 points. Of course the damage to individual shares has been immense, but even in some of the most heavily beaten-down names a recovery has taken place. Investors are, in theory, supposed to relish the chance to buy up their favourite shares at knock-down prices, and they got such a chance today. Only time will tell if this has been a spectacular buying opportunity, or the first act in a new and volatile bear market.

Other markets have been hit hard too, with the eurozone’s major indices taking it particularly badly. If it comes down to it, many of the UK’s biggest firms will look compelling if sterling remains weak, while a falling dollar, thanks to yet another dramatic reassessment of the outlook for Fed policy, could boost commodity prices and provide another tailwind for UK stocks. However, we have likely not seen the end of the rush to safe havens, as the UK and its erstwhile EU partners begin their prep for a long period of negotiation.

US presidential candidate Hillary Clinton has now commented on the Brexit vote, and cites the “special relationship” between the two countries. She said:

We respect the choice the people of the United Kingdom have made. Our first task has to be to make sure that the economic uncertainty created by these events does not hurt working families here in America.

We also have to make clear America’s steadfast commitment to the special relationship with Britain and the transatlantic alliance with Europe.

More from Dominic Rossi, global chief investment officer at Fidelity International. In a conference call, he said he was asked by a client this morning how Brexit compared with the ERM debacle of 1992. He said:

“This is without doubt a far more important event in that Brexit signifies a structural break in Britain’s economic and political models models, which we very much had in place since the second world war. It really does break the post-war settlement in many ways. The break in the political model is going to be more profound than the break in the economic model.”

Scotland is likely to hold a referendum within two years and he saw a “high prospect” that it will break from the UK after 300 years, while the Good Friday agreement in Northern Ireland is also at risk.

Rossi predicted a “mild recession” by Christmas– not as bad as during the financial crisis of 2009 – but one that would last until 2017. He reckons UK growth will start slowing over the summer and that the economy will fall into recession – defined as two or more consecutive quarters of contraction – in the autumn.

Turning to markets, Rossi think the $1.40 level against the dollar that sterling has held over 30 years could switch from being a floor to a ceiling. The pound dropped to $1.38 after the vote to leave.

“Sterling will work its way towards the low $1.30s in the near future over the next few weeks and months.”

Against the euro, he thinks that sterling – currently at €1.24 – will fall through €1.20.

He explained that the FTSE 100 index could actually rally if sterling continues to fall towards $1.30, as many constituents are non-sterling companies which report their revenues mainly in dollars. [Something we are already seeing]

“European stocks are reflecting some economic impact from Brexit but I don’t think eurozone will enter a recession – the UK will have the privilege of that.”

“Brexit was a black swan event and there is a potential flock of black swans flying over Europe with the political calendar,” he said – referring to upcoming elections in Spain on Sunday and Germany and France next year.

Turning to UK interest rates, Rossi does not expect rate cuts any time soon.

“I wasn’t surprised that Mark Carney didn’t cut rates today. It is going to be very difficult for him to do so with sterling weak.” [as this pushes up inflation]

“He will want to be confident that sterling has bottomed before he does so because there will be a one-time inflationary impact. That might not be until third or fourth quarter.”

“What is really important is that those Brexit forces don’t themselves fragment.. If that were all to splinter then I think the currency markets would take a very dim view. We really do need now political leadership.

“I would not be surprised at all if the first thing that the new prime minister does is call a general election.”

Back with the US, and the Securities and Exchange Commission issued this statement after Wall Street opened:

The U.S. equity markets opened normally for trading this morning. We are continuing to closely monitor the markets and have been in regular communication with financial institutions, exchanges, and market utilities, as well as our financial regulatory counterparts.

The FTSE 100 is off its worst levels following the promise from central banks to provide liquidity when necessary, says Connor Campbell, financial analyst at Spreadex:

There isn’t much to explain the FTSE’s rather remarkable recovery. A decent strand of buyers swept in when the UK index hit its earlier lows, helping to lift it back above 6200 despite a continued battering for its Barclays/RBS/Lloyds banking trio. The liquidity support promised by the Bank of England (and subsequently the ECB and Federal Reserve) appears to have been the main catalyst for the turnaround, especially given the fact that the afternoon was still littered with worrying news (namely the likelihood of a second independence referendum in Scotland).

While the FTSE rose phoenix-like from the ashes of its earlier decline, the Eurozone indices weren’t quite as lucky. The 5-6% drops by the DAX and CAC, while signalling a rebound from their respective morning nadirs, still are far worse than those seen in the UK and US (the Dow is down just over 2%), suggesting investors may not only be worried by the Brexit, but by the weekend’s Spanish election.

Even worse than the Eurozone was the pound. Sterling is still hovering around 31 year lows, at $1.37 against the dollar (dipping from $1.39 following Nicola Sturgeon’s suggestion of a 2nd Scottish referendum) and $1.24 against the euro. It is understandable that the pound has been the instrument that has struggled the most to reduce its losses, though it does have the prospect of a wave of central bank rank cuts to potentially look forward to.

By mid afternoon, trading volumes for the FTSE 100 reached €20.5bn, around twice the recent daily average, according to equity exchange Bats Europe. Its full statistics show:

Share volumes soar
Share volumes soar Photograph: BATS Europe

More reaction to the Brexit vote from across the Atlantic, this time from Treasury secretary Jacob Lew, and another statement designed to reassure:

The people of the United Kingdom have spoken and we respect their decision. We will work closely with both London and Brussels and our international partners to ensure continued economic stability, security, and prosperity in Europe and beyond.

We continue to monitor developments in financial markets. I have been in regular contact in recent weeks with my counterparts and financial market participants in the UK, EU and globally and we are continuing to consult closely. The UK and other policymakers have the tools necessary to support financial stability, which is key to economic growth.

Jacob Lew
Jacob Lew
 Photograph: Alex Brandon/AP

The vote for Brexit will not immediately affect the Republic of Ireland’s credit rating, said ratings agency S&P:

S&P Global Ratings said today that the U.K.’s vote to leave the European Union does not immediately affect the sovereign credit rating on the Republic of Ireland (A+/Stable/A-1).

We believe that the effect of an exit of the U.K. from the European Union (Brexit) on the Irish economy would likely be negative, at least in the short to medium term, but of uncertain magnitude and mixed across sectors. In terms of direct trade relationships, the U.K. accounts for only around 12.4% of Irish goods and 20% of Irish service exports, well below 50% levels observed when both countries joined the European Community in 1973.

However, the sectors that serve the U.K. market are, on average, more labor intensive and any negative shocks could damage the mending Irish labor market. Other negative economic risks associated with a Brexit could include the weakening of the U.K.’s financial service sector, with which Ireland’s financial service sector is closely linked, and the potential ripple effect stemming from lower demand from the rest of the EU.

Furthermore, many aspects of Britain’s relationship with the EU, and therefore the U.K.-Irish relationship, would be unclear, increasing uncertainties related to trade and investment between the two countries.

We do not believe the potential relocation of some U.K. businesses to Ireland would fully offset the overall negative impact of Brexit in the short to medium term.

Nevertheless, we expect the Irish economy to stay resilient enough to withstand the negative impact of the Brexit. In our view, the pace of fiscal consolidation and reduction in general government debt may slow down somewhat, but the ratings will remain supported by Ireland’s strong institutions, predictable policy making, and improving external balance sheet.

The FTSE 100 is indeed now well off its worst levels, helped by the fact that a number of major companies have their earnings in dollars and should benefit from the plunge in the pound.

The index is now off 1.9% at 6218 and is actually up 3.3% on the week, helped by the gains in the early part of the week when investors convinced themselves that the Remain side would win the referendum.

Could it happen.....?

US stock market joins world rout

The Wall Street opening bell
The Wall Street opening bell Photograph: Bloomberg TV

Wall Street is joining the global selloff, as the shockwaves from Britain’s Brexit vote reach the other side of the Atlantic.

The Dow Jones industrial average has tumbled by 505 points in the first few minutes, a plunge of 2.8%. That looks like it’s biggest intraday fall since January.

That takes the Dow down to 17,503, in a wave of panicky selling as US traders digest the shock news from the UK.

They have to absorb the fact that Britain has voted to leave the EU, the resignation of prime minister David Cameron, the slump in the pound to a 31-year low, and very deep losses across Europe’s stock market.

Not forgetting the promises of emergency liquidity, if needed, from the Bank of England, the ECB and the Federal Reserve.

Tech stocks are being hit hard, sending the Nasdaq index down almost 4%:

Fallers on Wall Street

Updated

At least one currency dealer in the City has profited from the Leave vote.

ACE-FX, which has branches in Canary Wharf and London Bridge has spent the day telling customers that it sold all its currency yesterday and has nothing left in its vaults.

Only customers who pre-ordered currency were allowed to complete transactions.Lines of disappointed people, mainly tourists keen to buy cheaper pounds, were turned away.

Updated

And here’s US president Obama on Brexit:

Updated

Here’s the full G7 statement referred to by George Osborne earlier:

We, G7 Ministers and Governors, respect the intention expressed today by the people of the United Kingdom to exit from the European Union.

We are monitoring market developments following the outcome of the referendum on the UK’s membership of the EU.

We affirm our assessment that the UK economy and financial sector remain resilient and are confident that the UK authorities are well-positioned to address the consequences of the referendum outcome. We recognize that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. G7 central banks have taken steps to ensure adequate liquidity and to support the functioning of markets.

We stand ready to use the established liquidity instruments to that end.

We will continue to consult closely on market movements and financial stability, and cooperate as appropriate. We remain united and continue to maintain our solidarity as G7.

Updated

Private investors are seeing the day’s falls as a buying opportunity according to investment manager Hargreaves Lansdown.

Som 80% of the trades through its share dealing service this morning were purchases, compared to around 60% on an average day. Laith Khalaf, Hargreaves Lansdon senior analyst said:

Private investors are clearly seeing today’s market fall as a buying opportunity, and are out in force bargain-hunting. The most popular stocks are also those which have seen their prices hit hardest this morning, namely the banks and house builders.

We know that private investors have been sitting on the sidelines until after the referendum, and early indications are there may be some buying activity now the market has dropped.

The US Federal Reserve is the latest central bank after the Bank of England and European Central Bank to try and reassure it is ready to act. In a statement it said:

The Federal Reserve is carefully monitoring developments in global financial markets, in cooperation with other central banks, following the results of the U.K. referendum on membership in the European Union.

The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.

It is not so long ago that the US central bank was expected to raise interest rates again after its hike in December. That is now unlikely to happen in the immediate future. Indeed, could there even be a cut?

Updated

Morgan Stanley is denying that it is moving 2,000 staff out of the City, as the BBC is reporting.

“The BBC story is totally false” a Morgan Stanley spokesman said .

Updated

Morgan Stanley 'moving 2,000 staff out of London'

The BBC’s Ben Thompson is reporting that US investment bank Morgan Stanley has begun the process of moving some staff out of the City, to Ireland and Germany.

We’re looking into it now.

It’s certainly plausible; last week, Morgan Stanley said it could relocate 1,000 workers out of the UK if the Leave campaign won yesterday’s referendum.

Nice chart from the FT, showing how today’s sterling plunge is the third-worst currency selloff in the last 40 years.

It is only beaten by the shock decision to lift Switzerland’s currency peg 18 months ago, and the turmoil caused to Japan by the 1973 oil crisis.

A sign for Wall Street.

US markets are set to open soon and at the moment it looks bad.

Dow Jones Industrial futures - an indication of which way the market will go - are down 2.64% or 468 points. It’s not as bad as the drops we saw during the financial crisis - which were often twice that or more - but there are other signs of worry.

Oil is down, Brent crude is off 4.9% at $48.45, suggesting worries about a global slowdown. And gold - favourite investment of worried investors - is up 5.2% at $1,328.

The chancellor has also pledged to do all he can to implement the public’s decision.

In practice, though, David Cameron’s resignation casts a huge shadow over Osborne’s own career, after six years as Britain’s finance chief.

IMF urges Britain and Europe to work together

Breaking: The head of the International Monetary Fund has urged Britain and Europe to co-operate, following last night’s seismic referendum result.

Christine Lagarde, managing director of the IMF, also backed the decision by the central banks of Britain and the eurozone to promise massive liquidity injections, if needed (as covered this morning)

She says:

“We take note of the decision by the people of the United Kingdom. We urge the authorities in the U.K. and Europe to work collaboratively to ensure a smooth transition to a new economic relationship between the U.K. and the EU, including by clarifying the procedures and broad objectives that will guide the process.

“We strongly support commitments of the Bank of England and the ECB to supply liquidity to the banking system and curtail excess financial volatility. We will continue to monitor developments closely and stand ready to support our members as needed.”

Updated

Osborne briefs G7 on Brexit

World finance ministers and central bank chiefs have been briefed on Britain’s decision to leave the European Union.

That’s according to Britain’s chancellor of the exchequer (at the time of writing, anyway) who says:

Thomas Cook

UK holiday firm Thomas Cook has halted web sales of foreign currencies, after being swamped with demand for euros from anxious Brits.

The company has also imposed a £1,000 limit on currency sales at its shops, due to unprecedented demand after a record-breaking fall for the pound overnight.

A spokeswoman told Reuters that:.

“We have temporarily suspended our travel money website following unprecedented customer demand for foreign currency overnight and this morning.

“The demand for the euro has been building and we have had to just restrict it for now. We have enough currency to fulfil our standing orders but we have had to restrict new orders.”

Earlier this week, there were queues outside FX dealers in London as people tried to protect themselves against a sterling crash. They now look quite prescient, given the pound has slumped from $1.50 to $1.37 in the last 14 hours.

S&P confirms that Britain's credit rating is at risk

Standard & Poor’s has confirmed it is reviewing the UK’s top-rated AAA credit rating, which means they are considering cutting it.

The rating agency fears that Britain’s growth performance, external funding, and the public balance sheet are all going to suffer.

And it warns that it could easily cut the rating by at least one notch, due to the economic problems Brexit will cause.

S&P says:

A vote to leave would, in our view, deter investment in the economy, decrease official demand for sterling reserves, and put the U.K.’s financial services sector at a competitive disadvantage compared with other global financial centres.

As mentioned earlier, S&P is the only one of the Big Three agencies to have kept a AAA rating on UK government debt.

JP Morgan's Flanders: Marine Le Pen will be happy

Stephanie Flanders, chief market strategist for Europe at JP Morgan Asset Management, said that while the vote to leave was a “seismic change for the UK” it was unlikely to prove a threat to the world economy.

She told a conference call this lunchtime that:

“I don’t think Brexit puts the global recovery at risk.”

However there were wider political consequences, she said, pointing to elections in France and Germany next year and in Spain on Sunday.

She singled out France’s far-right leader, saying:

“Marine Le Pen will feel strengthened by this.”

This is true....

Flanders estimated that it would reduce UK economic growth by 1.5% between now and 2017, and there could even be a quarter of contraction by the end of the year.

She said that while the government was likely to loosen fiscal policy in the short term to counter weaker economic growth, there could be more austerity in store in future years to balance the books.

Turning to the housing market, she said:

“The assumption that this is not going to be good for the London property market as a whole is a safe bet.”

Finance ministers and central bank chiefs from the world’s top advanced economies are have held a conference call to discuss Britain’s referendum.

That’s according to German finance ministry spokesman Martin Jäger, who told reporters:

“A teleconference of the G7 ministers and central bank governors is underway at this minute. At the end of this teleconference, there may be a statement.”

Lombard Odier: Recession is a near certainty

Britain is almost certain to fall into recession, even if central banks act to prevent market mayhem.

So argue Jan Straatman and Salman Ahmed of Lombard Odier Investment Managers, who write:

Focusing on the Bank of England, the central bank is in a very tricky situation. The sharp macro imbalances facing the UK economy - the twin deficits - will continue to play out in the form of sustained pressure on sterling. Indeed, to protect the currency and the country from a balance of payment crisis, we think a sustained QE programme is unlikely to be the correct policy response.

A recession is a near certainty and we expect inflation to rise sharply on the back of the weaker currency.

They also predict further wild swings in the markets, following the prime minister’s resignation this morning which has left Boris Johnson as the front-runner to replace him.

Sterling is at the centre of the storm, with a nearly 10% hit against the US dollar since Thursday’s close. Not surprisingly, traditional safe havens such as government bonds in advanced economies, the Japanese yen and gold are rallying as investors take flight to safety.

In terms of pure politics, the turmoil for the UK and the European Union has just started. David Cameron announced his resignation but we expect the coming weeks and the upcoming Conservative leadership election to be tumultuous for markets and sterling.

Over in Australia, people are discovering that they can’t exchange money into, or out of, British pounds.

Commonwealth Bank, Australia’s biggest bank, has told customers that sterling transfers aren’t currently available, while it assesses the aftermath of the Brexit poll.

And some National Bank of Australia customers are finding problems transferring money into sterling, or US dollars.

European bank shares have been roundly routed this morning, as investors predict weaker growth and new economic uncertainty:

Updated

An oil rig in the North Sea.

Britain’s referendum has hit commodity prices, sending the oil price sliding and could also hurt efforts to rescue South Wales’ steel industry.

Brent crude, sourced from the North Sea, has tumbled by 5% today to $48.38 per barrel.

That reflects fears that Brexit will weaken the global economy.

Sebastien Marlier, senior commodities editor at the Economist Intelligence Unit, believes oil will continue to weaken:

Uncertainty about the UK, EU and global economy will initially translate into weaker commodity prices. The recent upward trend in oil prices will reverse, with the price of crude falling quickly back below US$40/barrel on weaker sentiment. Most commodities will follow suit. Gold will be an outlier, however, and will continue its upward trend amid investor flight to safety. Significantly for the UK, there is also a risk that the coming period of volatility could undermine negotiations to save Tata’s Port Talbot steelworks.

After the initial shock of Brexit wears off, fundamentals should gradually reassert their influence over the oil and commodities markets, with prices rising again as demand and supply come closer to balance. However, Brexit will lead to slightly slower European and global economic growth in the medium term. This will translate into a more gradual increase in oil demand and, in turn, the oil price.

London’s new mayor is already taking steps to be closely involved in the Brexit talks:

Panmure Gordon and Co in London.

Over at City stockbroker Panmure Gordon, which also saw a return to 1980s-style vocal trading earlier today, the mood has calmed a tad.

The most audible voice now belongs to a television presenter, rather than traders yelling buy and sell orders to each other (as during the dramatic market open at 8am)

Now the reality of Brexit is sinking in, brokers here are finding that American clients see an investment opportunity and many of them have been buying London-listed shares. Their dollars go a bit further than they did.

However, that is not to be confused with US investors thinking that the UK has made a sensible choice.

Nick Hiley, head of sales at Panmure Gordon, says:

“UK investors often make the error of thinking our assets are priced in sterling. They’re not. [The rest of the world views them as being] priced in dollars. In dollars the market is off much more. The damage is considerable.”

Right now, the FTSE 100 is down 300 points or 4.8%, a loss of £77bn. But the market is also worth 8% less than yesterday, due to the slump in the pound.

Updated

The pound has dropped by two cents in the last few minutes, after Scotland’s first minister, Nicola Sturgeon, floated the prospect of a second independence referendum.

Sturgeon is holding a press conference right now. She says that another referendum is now very likely, and that Scotland shouldn’t be taken out of the EU against its will.

This has knocked the pound back to $1.367, from $1.39 at 11am BST.

The US stock market is expected to fall by over 2.5% when New York traders gets their teeth into Brexit, in three hour’s time.

UK house prices to be hit by Brexit

A row of Sold and For Sale signs.

House prices are a popular conversation point at British dinner parties, school gates and cafes at the best of times.

So this morning, many people are wondering what the EU referendum means for the property market. And the early verdict is that it’s going to dampen demand, and push prices down.

Jan Crosby, head of housing at KPMG UK, predicts at least six months of uncertainty -- and longer in London. He expects prices to take a 5% hit, but more in the capital.

“As we enter a new phase of uncertainty following the UK’s vote to leave the EU, it is very likely people will put big decisions on hold, and one of the biggest decisions people ever make is a house purchase.

This means we can expect short term transaction volumes to decrease and to stay deflated for some time – perhaps until next spring. While we may not notice much of a change over summer, given the traditional hiatus in the housing market, the usual pick up in autumn may not materialise.

Richard Donnell, insight director at property consultancy Hometrack, also expects demand for new houses to slide:

“The immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see the short-term impact on financial markets and the economy at large.

Updated

Fidelity predicts mild UK recession

David Cameron’s resignation means Britain is now gripped by a political crisis, as well as an economic one.

Dominic Rossi, global CIO of Equities at Fidelity International, believes the political shock will be more serious. But he also believes Britain will fall back into recession, at a time of growing risk worldwide.

“From an economic point of view, we can expect lower growth in the UK and across Europe, and that is now being discounted in equity markets. We also expect a mild recession in the UK over the course of this year and into next year.

However, what matters more is that political risk premia will now rise around the world and this implies lower valuations. Today’s result will set off a domino effect of political risk. Whether it’s the US election later this year or the French election next year, investors are going to be far more cautious.

Jonathan Hill, the British European Commissioner, could become an early casualty of the referendum.

Hill is currently responsibly for financial stability, financial services and capital markets union. But not for much longer, if some MEPs get their way.

The Brexit vote is already causing problems for some holidaymakers in Greece, according to this tweet from the island of Kos.

ECB promises more liquidity to stem Brexit panic

ECB President Mario Draghi has been liaising with other central bank chiefs
ECB President Mario Draghi has been liaising with other central bank chiefs Photograph: Francois Lenoir/Reuters

Hot on the heels of the Bank of England, the European Central Bank has promised to provide extra liquidity to protect the financial world.

In a brief statement, the ECB said it was closely monitoring financial markets and is in close contact with other central banks.

It says:

The ECB stands ready to provide additional liquidity, if needed, in euro and foreign currencies.

The ECB has prepared for this contingency in close contact with the banks that it supervises and considers that the euro area banking system is resilient in terms of capital and liquidity.

The ECB will continue to fulfil its responsibilities to ensure price stability and financial stability in the euro area.

There were rumours last week that central banks could launch co-ordinated action to calm the markets after a Brexit victory.

Central banks are expected to use ‘swap lines’ to share currency with each other so that, for example, a British bank isn’t short of euros.

Not every City boss is weeping about the referendum result.

Howard Shore, executive chairman of stockbroking firm Shore Capital Group, argues that the British people made the right decision.

We now have a fantastic opportunity to deregulate the economy and better compete on a global stage in the 21st century.

Shore also argues that Europe shouldn’t punish the UK for its decision:

“The closeness of the result should encourage EU leaders to think pragmatically, arriving at a solution where Britain is out of the political union, but retains the ties that are of mutual benefit; and creates a two speed Europe for those wanting to stay out of the Eurozone and its inevitable move towards closer political union. As has been said many times, the Germans have no appetite to exclude us from the single market – only yesterday its industry chief, Markus Kerber, noted the foolishness of imposing trade barriers.”

Despite today’s selloff the FTSE 100 is basically flat for the week (it’s currently down 300 points, or 4.8%)

Over at another City trading firm, XTB, there is scepticism that the optimism of many clients is going to end well.

David Cheetham, the firm’s market analyst, says that clients are trying to “pick a bottom” - a City term for buying shares at their cheapest point. But he fears that the selloff will intensify.

He tells Simon Goodley that:

We are going to have a long period of uncertainty which is not conducive to strong financial markets. I feel we will retest lows”.

Updated

The stock exchange in Frankfurt this morning.
The stock exchange in Frankfurt this morning. Photograph: Frank Rumpenhorst/EPA

The pound is the worst-performing asset today:

Fitch Ratings, the Paris based agency, says that decision to leave the EU is “credit negative for most sectors in the UK”, due to weaker medium-term growth and investment prospects and uncertainty about future trade arrangements.

Alex White, regional director for Europe at the Economist Intelligence Unit, said he was still digesting the implications of the vote, but had these initial thoughts:

“It’s pretty disastrous. You tend to get a little bit of an overreaction [in markets] and then a small correction but we’re not going back to anything like the status quo for a long time.

“I expect you’ll get ‘buyers remorse’ very quickly. People will feel this. They’ll see it in their pension statements.”

White added that the statements from the Prime Minister and from Mark Carney struck the right tone.

“Both of them did a pretty good job. Cameron made the best of a bad situation.”

Updated

Moody's hints at rating downgrade.

Rating agency Moody’s has issued a report on Brexit, warning that the UK’s economic and financial performance will suffer from “a prolonged period of policy uncertainty”.

It warns that investment flows into Britain will be his by the heightened uncertainty; which means lower growth.

That will be “credit negative for the UK sovereign and other UK debt issuers”, Moody’s adds - in other words, the UK could be downgraded.

IG has a trading desk that deals solely with European clients.

Do they think the UK has gone mad? “Pretty much, yes,” one trader tells me.

Airline group IAG warns on profits after Brexit vote

A British Airways aircraft landing at Dublin Airport.

IAG, the parent company of British Airways, has become the first FTSE 100 company to warn today that the EU referendum will hit its earnings.

It has issued a short statement to the City, saying it no longer expects to hit its profit forecasts for 2016.

International Consolidated Airlines Group, S.A. (IAG) believes that the vote to leave the European Union will not have a long term material impact on its business. In the short term, however, in the run up to the UK referendum during June, IAG experienced a weaker than expected trading environment.

Following the outcome of the referendum, and given current market volatility, while IAG continues to expect a significant increase in operating profit this year, it no longer expects to generate an absolute operating profit increase similar to 2015.

IAG’s shares are now down 20%, making it one of the worst-performing members of the FTSE 100.

Updated

Mark Carney’s statement underlines that all the contingency plans that were drawn up ahead of the vote are having to be rolled out.

The governor’s attempt at reassurance, the soothing statements from the high street banks and the decisions by banks to try to do more voice trading rather than relying on computers are all part of that strategy.

Lloyds Banking Group have also tried to sound reassuring,

“There are no changes in the products or services offered to customers, either in the UK or overseas. Customers can continue to use our banking and insurance services as they did before.

Customer deposits in the UK continue to be protected by the Financial Services Compensation Scheme; and the Prudential Regulation Authority and Financial Conduct Authority remain our primary regulators.

JP Morgan expects UK rate cut soon

Malcolm Barr, economist at JP Morgan, has predicted Scotland would seek another independence referendum before the UK completes its EU exit, and “it’s likely that Scotland will vote to leave.”

Speaking to investors, Barr added that Northern Ireland was “going to be troublesome to manage” with Sinn Fein already talking about a referendum (although that is unlikely to happen).

In the EU, the vote to leave “is going to energise populist parties” but JP Morgan does not anticipate referenda on EU membership elsewhere.

European finance ministers are meeting today and there could be an emergency EU summer this weekend or early next week. “The initial signs are not particularly conciliatory... Out is out and there won’t be any special favours for the UK.”

Barr added:

“An emergency budget is possible but certainly won’t have any of the character that Mr Osborne described.”

His colleague Allan Monks believes the Bank of England will cut interest rates by 50 basis points [to zero] by the August meeting, with a 25bps cut in July “a distinct possibility”.

He said the Bank would weigh up the potential inflation shock resulting from the sharp drop in sterling against the damage to economic growth.

“There will be an inflation move up close to 3% by the end of next year on the basis of what sterling has done this morning, but I don’t think that’s enough to stop them from easing.”

Monks noted that the UK would retain access to the single market for the time being, but uncertainty will rise further, so “we expect that to create further delays in firms’ investment and hiring decisions.”

He is predicting that UK growth will “slow to a crawl” in coming quarters, with growth likely to be 1% lower over the coming year, while Britain’s unemployment rate is likely to rise by half a percentage point to 5.5% next year.

Paul Meggyesi, currency strategist at JP Morgan, said the pound had further to fall.

“I’m not convinced we’ve already seen the lows in sterling.”

The sterling-dollar rate could go below $1.30 over the next week or so, he said.

Updated

After 90 minutes of noisy drama, it’s noticeably quieter now at Cantor Fitzgerald.

The lull before the US market open? Bank shares, though, are “still getting hammered”. So it’s all about waiting for the US investors to wake up..

Property firms are the biggest fallers, though, which suggests investors are expecting a housing downturn.

The biggest fallers on the FTSE 100 at 9.30am
The biggest fallers on the FTSE 100 at 9.30am Photograph: Thomson Reuters

We might never find out who saw them, but there is plenty of speculation in the City that hedge funds commissioned exit polls yesterday that got things even more wrong than the opinion polls and the betting markets.

One trader says:

“Sterling was so strong last night that it suggests that somebody had very strong data that the vote was going to be Remain.

Some hedge fund has probably paid about half a million for it and the data was absolutely terrible.”

Every cloud, and all that.

While Carney was speaking, IG traders were yelling across desks to check if they can make trades.

“I want to sell 22,000 [shares]” screams one. “Yeah, I’ll trade that,” replies a colleague.

And some clients think today’s selloff is a buying opportunity.

“It’s almost all been buying,” says one trader.

“Clients think things have been oversold. There is very little selling.”

The stock market has now clawed back half of its losses, following Mark Carney’s pledge to provide £250bn of funds to calm the situation.

The FTSE 100 is now down 274 points, or 4.3%, at 6065 – that’s still a very large fall, that wipes out around £70bn.

Mark Carney

Mark Carney concluded his statement by underlining how the Bank of England is prepared to act.

The governor said:

A few months ago, the Bank judged that the risks around the referendum were the most significant, near-term domestic risks to financial stability.

To mitigate them, the Bank of England has put in place extensive contingency plans.These begin with ensuring that the core of our financial system is well-capitalised, liquid and strong.

This resilience is backed up by the Bank of England’s liquidity facilities in sterling and foreign currencies.All these resources will support orderly market functioning in the face of any short-term volatility.

The Bank will continue to consult and cooperate with all relevant domestic and international authorities to ensure that the UK financial system can absorb any stresses and can concentrate on serving the real economy.

And he finished by telling the public that the future is in their hands....

That economy will adjust to new trading relationships that will be put in place over time.It is these public and private decisions that will determine the UK’s long-term economic prospects.

The best contribution of the Bank of England to this process is to continue to pursue relentlessly our responsibilities for monetary and financial stability.

These are unchanged.

We have taken all the necessary steps to prepare for today’s events.In the future we will not hesitate to take any additional measures required to meet our responsibilities as the United Kingdom moves forward.

Bank of England promises £250bn to calm markets

Bank of England governor Mark Carney is giving a statement now.

He says there will inevitably be a period of uncertainty following the decision to leave the European Union. But there will be no immediate change to our relationship with the EU.

It will take some times for the UK to establish new relationships with the rest of the world. So some market and economic volatility can be expected, but we are well prepared for this, says Carney.

He says he has been in close contact with chancellor George Osborne through the night, and this morning.

UK banks are more resilient than before the 2008 crisis, Carney says, and are forced to carry 10 times as much capital.

The Bank of England will not hesitate to take additional measures as required to address any market volatility, says the governor

And Carney says the BOE will make £250bn of additional funds available through its normal market operations to stability markets, as needed.

That’s a pledge to pump huge liquidity into the banking system, if necessary, to prevent the wheels of the City grinding to a half.

Striking a reassuring tone, Carney says the Bank will consider what additional measures may be needed over the next few weeks [so he’s not announcing any emergency measures right now].

And governor Carney concludes by repeating that the BoE “will not hesitate to take any further measures, as required.”

And with that, he heads back into the Bank.

Updated

European stock markets are deeply in the red:

European stock markets

Massive amounts of shares are changing hands in the City.

Almost 463.9m trades flowed through the London stock market in the first 30 minutes, the sort of volume you might see by after lunchtime on a normalish day.

Predictions of massive losses across Europe are proving accurate.

The French CAC is the worst casualty, tumbling by 8.5% in early trading in Paris.

And Germany’s DAX is close behind, down 8%.

David Cameron to resign

David Cameron

Prime minister David Cameron has announced that he will resign as prime minister, following the referendum.

He expects a new leader to be in place before the Conservative Party conference, this autumn.

Speaking outside Downing Street, Cameron says:

He says he is very proud of what he has done as prime minister.

He says he has always thought you have to confront big decisions, not duck them.

He formed a coalition, delivered a referendum in Scotland and gave the public a referendum on Europe.

He fought the referendum with head and heart.

The referendum was not about him, he says.

But the British people have decided to follow another path. So they need a new prime minister.

  • Cameron says he will resign as prime minister.
  • He will do what he can to “steady the ship”.
  • He says he is not announcing a timetable today, but a new prime minister should be in place by the start of the Conservative conference.
  • He says he thinks the new prime minister should decide when to trigger the article 50 renegotiation process. So he will not trigger it himself.

Our main EU referendum liveblog has full details and reaction:

Updated

“Take another blood pressure pill,” says one Cantor Fitzgerald trader, as the volume of shares traded in London rises fast.

Stocks are again going into auctions because of the rapid movements in the share prices. No one appears to have time to stop to listen to Cameron, whose voice can be heard across the dealing room.

“Barclays down 28%!” yells one IG trader. It’s buzzing here.

IG increased the margin clients had to deposit in their accounts in the weeks running up to the vote. Clients will therefore be able to fund losses of around 10% before being asked for more funds. That means if you’re long of the FTSE you are (just) OK. If you’re long of the banks, credit card details please.

Shares in Barclays and Royal Bank of Scotland have both fallen by 25%.

At Cantor Fitzgerald, there are shouts that David Cameron is rumoured to be about to resign and lots of calling out of share prices as they start to open.

Trading floors are usually a lot quieter than most people think (more than 95% of trades here are online) but it’s different today.

IG traders shouting across the floor, like it’s 1986 or something. “Quite a hubbub for us,”says one. Very old school.

As the market opens, traders are expecting huge volumes in most shares, but some sectors look more vulnerable than others.

One trader says:

“Anything to do with buy to let property is a short”.

This is the biggest plunge for the blue-chip Footsie index since the 2008 financial crisis.

But shares are coming back a little bit -- the FTSE 100 is now “only” down 400 points, or 6.4%.

These are the top fallers on the FTSE 100 right now, as wild selling sweeps the City trading floors

FTSE top fallers

£120bn wiped off the FTSE 100

More than £120bn has been wiped off the FTSE 100 at the start of trading.

Housebuilders plunge by 40%

It’s an absolute rout!

The FTSE 100 has shed 527 points, or over 8%, in a massive selloff....

Some shares have lost a third of their value. Housebuilders Taylor Wimpey and Persimmon have plunged by 40%

And some shares have still not opened....

Shares dive in London

There are some big moves already.

Supermarket chain Morrisons is down 9%, Royal Mail (floated a few years ago) are down almost 7%. Mining group BHP Billiton has lost 6%.

But half the FTSE 100 hasn’t actually opened, as market makers struggle to match buy and sell orders.

The FTSE 100 - shares in green haven’t traded yet
The FTSE 100 - shares in green haven’t traded yet Photograph: Thomson Reuters

Europe’s stock markets are open, and shares are tumbling. But it’s going to take several minutes before we know the full damage....

The mood on the Cantor Fitzgerald floor is that continental European stocks could get hit harder than those in the UK.

Also echoing the feeling that the market was caught wrong way, expecting a Remain vote and for the pound not to weaken.”Get your tin hats on,” says one trader, minutes before the market opens.

Updated

The general view on the IG trading floor is that the Bank of England’s statement says nothing (The Bank may take that as a compliment).

Traders are looking forward to hearing what other central banks say - plus a view from the boss. As one puts it: “What do [Mario] Draghi and [Angela] Merkel say?”

Jes Staley of Barclays

The chief executive of Barclays, Jes Staley, has issued a statement on the referendum result:

This is a significant decision and there will be many questions asked in the coming days and weeks about what happens next. The answers are complex but our position is not: we will not break our stride in delivering the Barclays of the future.

We have stood in service of our customers and clients for over 325 years. We have been here for them through equally profound changes before. And no matter what has been laid before us, we have been here to help them achieve their ambitions.

That does not change today. And through the uncertainty of the months ahead, be in no doubt that we are ready to do whatever it takes to uphold that promise.

The strategy we announced on 1 March, 2016 was not conditional on the UK remaining in the EU. We are a transatlantic consumer, corporate and investment bank, anchored in the UK and the US. That remains the core of our strength and the Barclays of the future.

Updated

Back at Cantor Fitzgerald in the City, traders are bracing for the selloff in half an hour:

All eyes are on the German Dax, as well as the FTSE 100, with both being called down almost 10%.

“Sterling is steady at $1.36” says one trader.

“Who ever thought it would be $1.48 and $1.36 on the same day,” his colleague observes, amid scores of screens showing the state of play in the markets.

Updated

John McDonnell: Government must stabilise the economy

Labour’s shadow finance minister John McDonnell.

John McDonnell MP, Labour’s shadow chancellor, has commented on the market mayhem:

People will be waking up this morning to turmoil in the markets and the pound crashing, and fearing the emergency budget the Chancellor threatened to hike their taxes and cut public services.

The Government must now take steps to stabilise the economy, and to protect jobs, pensions and wages. Labour will not allow any instability to be paid for by the working people of this country?

Updated

German stock market to plunge

European stock markets could suffer even deeper falls than London, when trading begins in 40 minutes.

Germany’s DAX is currently expected to plunge by around 1,000 points at the open, a fall of around 10%. Bank shares are likely to suffer dramatic losses.

David Cameron is due to give a statement at 8am, just as the markets open (so that’ll be fun).

Chris Beachamp, chief market analyst at IG, says the PM’s next move is crucial.

“Sterling now will depend on the shape of the UK government at about 4pm and if Cameron is still there. If he says he’s going it will be sold off again. The best thing he can do is hold the line here. We also have Spanish elections this weekend. To lose one government would be unfortunate. To lose two would be careless.”

Traders from BGC Partners, a global brokerage company in London’s Canary Wharf, are waiting nervously for the markets to open.
Traders from BGC Partners, a global brokerage company in London’s Canary Wharf, are waiting nervously for the markets to open. Photograph: Russell Boyce/Reuters

At the Canary Wharf dealing floor at Cantor Fitzgerald they are preparing for the stock market to open at 8am.

One trader tells me he is expecting there to be “extended auctions” when the stock market opens. (These occur when share prices move more than 5%).

Bank of England: We'll take 'all necessary steps'

A street cleaner pushes his cart past the Bank of England in London, Britain June 24, 2016. REUTERS/Neil Hall
A street cleaner pushes his cart past the Bank of England this morning. Photograph: Neil Hall/Reuters

Newsflash: A statement from the Bank of England:

The Bank of England is monitoring developments closely. It has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks.

The Bank of England will take all necessary steps to meet its responsibilities for monetary and financial stability.

Updated

Listening to traders talking to clients, it becomes very clear what a shock the result is to many in the City.

I’ve just overheard a conversation with one IG client who had a profitable position on the shares of one major high street bank. Well, it was profitable when the market closed last night.

The conversation now involved various scenarios of the shares crashing - plus talk of the client providing “more margin” ie, put some more cash into your account sunshine.

Tesco has suspended its currency service for holidaymakers amid the market turmoil.

Visitors to its holiday money site are greeted with a screen saying “We are sorry... the online ordering service is currently not available.”

Holidaymakers who queued outside exchange bureaux yesterday to buy their euros ahead of going abroad this summer will be counting their blessings (as explained earlier).

Tesco Bank

If you’re just tuning in, you need to know that:

The London Stock Exchange has told Reuters that they plan to open at 8am, as usual.

On Monday, chancellor George Osborne refused to rule out suspending trading if the Leave campaign won the referendum.

Updated

Shares in two major banks, HSBC and Standard Chartered, have both tumbled by almost 10% in Hong Kong (where they are dual listed).

That gives you an idea of what to expect in London at 8am....

S&P: Britain to lose AAA credit rating

Britain is likely to lose its final triple-A credit rating, following the referendum vote.

S&P, which is the only Big Three agency to maintain Britain’s AAA rating, has indicated that a downgrade is now inevitable.

Moritz Kraemer, chief ratings officer for S&P, told the Financial Times that:

“We think that a AAA-rating is untenable under the circumstances.”

Moody’s and Fitch both downgraded the UK in early 2013.

The City’s trading floors will be a sea of red today, and a sea of discarded pizza boxes too:

IG's trading floor
IG’s offices in London Photograph: Simon Goodley

Updated

Multiple weighted gold bars.

Gold, the traditional safe haven in times of market turmoil, has soared in value overnight.

Bullion has jumped by 22% in sterling terms in a dramatic indication of worldwide panic over Britain’s exit from the EU.

At 10pm last night gold was trading at $1,256.50 an ounce, but it started to accelerate swiftly as early results from the referendum began to feed through.

This morning it is trading at $1,336. 66, a jump of 6.3% in dollar terms, but much more in sterling terms once the fall in the pound is taken into account.

Adrian Ash, head of research at BullionVault.com said the surge in the gold price was the fastest move against the pound in history.

“The surging gold price clearly shows the panic sweeping financial markets. Gold jumped 22% against the Pound overnight, its fastest ever move, leaping to new 3-year highs above £1000 per ounce.

This scene will be playing out across the City, and Canary Wharf, as analysts and investors ponder how to react to events.

The referendum result is emblazoned on electronic screens in Canary Wharf, for the benefit of any traders who slept through the drama of the last few hours.

Today’s market rout is going to create money-making (and losing) opportunities.

Chris Beauchamp, chief market analyst, says:

“People might see this as an opportunity. Maybe the FTSE will be seen as a buy to some. Others will say let’s go with the flow. Things tend to get worse, rather than better, at first. It is going to be a day of crazy volumes”.

There’s also Gallows humour in the City.

One client to IG trader: “Well, that proves Trump can win, doesn’t it?”

As if we didn’t have enough to worry about....

Britain faces years of unstable conditions, and recession - RLAM

The Remain side warned during the campaign that Brexit could push Britain into recession.

Piers Hillier, chief investment officer at Royal London Asset Management, believes this will now happen:

‘On the back of this morning’s result we expect the UK will fall into a recession. Unfortunately I see unstable market conditions lasting for between three and five years whilst new trade agreements are drawn up.’

‘It is our view that the UK Government will be left with no choice but to stimulate the economy through fiscal and monetary means, flooding the system with liquidity if necessary.’

The City and markets are often viewed as if they are prophets who can make money out of predicting what is coming next, but it doesn’t look as though too many anticipated Brexit.

One IG trader has just told me his clients were buying sterling right up to midnight. That changed when we got the news from Sunderland, before 1am.

High street banks have been in touch with their regulator at the Bank of England through the night.

One senior retail banker tells me:

“Everybody is braced for a roller coaster day”.

The BoE is expected to ensure that liquidity isn’t a problem.The banks have had a year to plan for the referendum, and have contingency plans in place.

What Brexit means for you

Currency dealers in a trading room at the KEB Hana Bank in Seoul today.
Currency dealers in a trading room at the KEB Hana Bank in Seoul today. Photograph: Jung Yeon-Je/AFP/Getty Images

Holidays

Sterling’s overnight collapse to little more than €1.20 against the euro means it is now worth nearly 15% less than the €1.42 rate enjoyed by holidaymakers last summer.

In terms of spending, that means a family who last year got through £500 while on holiday will this year need to find £75 more.

As for freedom to travel, Britons will in all probability be able to enjoy visa-free travel to EU countries for the foreseeable future.

Petrol

Get ready for the cost of petrol to rise in the next few days. Crude oil is priced in dollars, and once that figure is converted into today’s lower sterling rate, the price must inevitably rise.

Before the referendum, the crude price was $50 a barrel, and petrol was retailing at 112p a litre for unleaded. This morning the price of crude has moved little - it is up to $51, but the fall in sterling means that once translated into pounds, the price is likely to head towards 120p. It may make sense to fill up this morning. Note that fuel duty is 57.95p a litre for both petrol and diesel, and remains the biggest component of the price we pay. Motorists also pay 20% VAT on fuel.

Mortgages

All eyes will be on official Bank of England movements, with governor Mark Carney expected to speak after David Cameron sometime after 6am.

A hike in interest rates to defend the pound will hit millions of households on tracker-style mortgages. For example, around 700,000 people are on Nationwide’s 2.5% standard variable rate. If base rate goes up by 0.5%, it will take the cost of a £100,000 mortgage to £474 from £449.

But it is just as possible that interest rates could fall to provide liquidity and restore order to markets. A cut to zero from 0.5% would see repayments fall to £436 a month.

Each half-point change in rates adds or subtracts around £25 a month to most people’s repayment mortgages. People with interest-only mortgages see steeper changes - around £42 extra a month for every 0.5% rate rise.

The pound has slumped by over 6% against the euro, to €1.22, in a wave of selling. It was worth €1.30 yesterday.

That means one euro is worth 81.5p, up from 76p on Thursday.

Trevor Charsley at AFEX, a foreign exchange firm, says:

What we’re seeing now is the market reacting with complete shock and bewilderment as the results unfold.

Here’s our latest news story about the unfolding panic in world financial markets.

Global bank HSBC has predicted that the pound will fall to $1.20 by the end of the year.

There’s a real sense of shock on the IG trading floor this morning.

A trader here tells me:

“A lot of people are long equities [they have been betting on shares rising] which is fairly natural. There is going to be a lot of pain here.”

IG is calling the FTSE 100 to open down by around 7%. There has also been a flight to safety, with gold up 5%. Bitcoin is soaring too.

And Boris Johnson is now even money on Betfair to be next PM.

London stock market to plunge this morning

Britain’s stock market is going to suffer a huge selloff when trading begins in two hours time.

The futures market is indicating that the FTSE 100 index of blue-chip shares will plunge by over 554 points, or nearly 9%.

That would wipe almost £150bn off the Footsie, which contains many of Britain’s largest companies - and major international firms too.

European stock markets are also expected to suffer massive losses too, and Wall Street will surely follow suit when New York wakes up.

The futures market is predicting massive losses on global markets
The futures market is predicting massive losses on global markets Photograph: IG

We’re expecting to hear from Bank of England governor Mark Carney this morning, once prime minister David Cameron has responded to the referendum result.

Japan's finance minister 'very concerned'

Japan’s finance minister, Taro Aso has said he is “very concerned about the world economy” after Japan and other Asian markets suffered a day of turmoil in reaction to the Brexit vote.

Aso declined to say if financial authorities would intervene in currency markets after the dollar and pound plummeted against the yen, and the Nikkei 225 benchmark index shed more than 7% by early afternoon local time.

Trading in Nikkei futures was briefly halted as global equity markets plunged on rising fears that Britain would leave the EU.

Asian stock markets have already been routed, as traders watched events unfold in Britain with mounting panic.

Japan’s Nikkei has slumped by 7.6%, or around 1,200 points, in the biggest one-day rout since March 2011 (when the Fukushima earthquake struck).

Other markets are also deep in the red.

Major Asian stock markets today
Major Asian stock markets today Photograph: Thomson Reuters

Nick Robinson, co-founder of World First, has seen a few currency moves in his time, And he reckons the slump in the pound is huge.

“This is a major economic event and I don’t think the world has woken up to what the potential consequences might be”.

He acknowledges no one really knows those consequences but points to the possible impact on Europe and global confidence.

Separately I’m hearing that across the City there has been 30 times the average daily volume in dollar/sterling - and that is before London properly wakes up

The sun is rising over the City and the dealing floor is filling up at World First, where dealers are scrutinising screens and trying to come to terms with Brexit.

It is getting louder too.

Sterling is at $1.3460 - “stable” in the minds of one of the dealers here, despite the fact it has plummeted from $1.50 since the polls closed. It all about getting ready for clients who want to trade. There is also some humour: even the Zimbabwean dollar is up against the pound.

Another trader remarks he wasn’t born the last time the pound - at 31 year lows - traded at these levels.

Sterling suffers biggest fall in history

A huge wave of selling has driven the pound down to its lowest level since 1985.

Sterling has slumped by 15 cents, or more than 10%, to $1.33 against the US dollar. An astonishing slump.

The pound vs the US dollar, since 1971
The pound vs the US dollar, since 1971 Photograph: Thomson Reuters

The crash began in the early hours of this morning, once referendum results showed that Leave were winning more votes than the City had expected.

The pound vs the US dollar since yesterday

This is the biggest one-day plunge ever. It even dwarfs the sterling crash on Black Wednesday in 1992, when Britain left the ERM.

Introduction: World markets hit by Brexit shock

Good morning.

Financial markets around the globe are plunging after the British people rocked Europe by voting to leave the European Union.

After a night of wild drama, the Out campaign appears to have secured a decisive victory in the EU referendum. With most areas declared, Leave have around 52% of the vote, sending Britain into political uncertainty and the EU into its biggest crisis ever.

The pound has already plunged to a 30-year low.

And London’s stock market is expected to tumble very, very sharply at 8am when trading begins.

We’ll be tracking all the financial action, on what could be one of the most dramatic days in the City in decades.

Updated

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