Britain’s stunning decision to leave the European Union has sent the pound plummeting and is wreaking havoc on markets around the world.
The pound suffered one of its biggest single-day drops ever, sliding more than 10 percent over six hours, from about $1.50 to below $1.35 on fear that the ‘Brexit’ will spur global financial instability. The pound is now worth less relative to the U.S. dollar since at any point since 1985.
Asian markets tumbled in Friday trading, with Tokyo, Hong Kong and Sydney shedding 7.2 percent, 4.7 percent and 3.18 percent respectively. Shanghai, Singapore and Taipei were also down.
The Dow futures are down more than 600 points and the Standard & Poor’s 500-stock index about 1000. London’s FTSE 100 index is expected to open at least 6 percent down from Thursday’s close.
Tareck Horchani, a senior sales trader at Saxo Capital Markets in Singapore, predicted a rough day ahead. “London and New York will continue this move lower,” he said.
After months of speculation about the economic impact of a “Brexit” vote – a vote for Britain to leave the EU – markets lurched back and forth as early results came through.
Major markets were mostly up as Britons headed to the polls on Thursday. But stronger than expected results for the ‘Leave’ camp in key districts led to a dramatic reversal in sentiment, sending the pound plummeting and bolstering safe assets like the Japanese yen.
The pound had initially surged alongside “Remain” sentiment, only to whipsaw back, sinking 6.72 percent against the dollar, before regaining some ground.
Xinhua, China’s Communist Party-controlled newswire, speculated that a Brexit vote would put downward pressure on global markets, potentially causing China’s markets to drop 5 to 10 percent.
(c) 2016, The Washington Post · Emily Rauhala