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UK's top credit rating at risk as Brexit recession looms - business live Wall Street joins global market sell-off as Brexit recession looms - live
(35 minutes later)
3.14pm BST
15:14
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.
3.09pm BST
15:09
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.
3.06pm BST
15:06
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.
2.45pm BST
14:45
Could it happen.....?
FTSE 100 down just 2.5% from down 9%....and its about 25/1 to close up on the day. Just a thought
2.41pm BST
14:41
US stock market joins world rout
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%:
BREAKING: Nasdaq seeing worst drop since Nov, 2011 » https://t.co/TGMGUaWBm7 pic.twitter.com/VhBwryqrdz
Updated
at 2.43pm BST
2.31pm BST2.31pm BST
14:3114:31
Phillip InmanPhillip Inman
At least one currency dealer in the City has profited from the Leave vote.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 customer that it sold all its currency yesterday and has nothing left in its vaults. 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.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
at 2.41pm BST
2.29pm BST2.29pm BST
14:2914:29
Here’s US president Obama on Brexit: And here’s US president Obama on Brexit:
President Obama on #Brexit decision: "The people of the United Kingdom have spoken, and we respect their decision." pic.twitter.com/lPXO3CGztxPresident Obama on #Brexit decision: "The people of the United Kingdom have spoken, and we respect their decision." pic.twitter.com/lPXO3CGztx
Updated
at 2.41pm BST
2.24pm BST2.24pm BST
14:2414:24
Here’s the full G7 statement referred to by George Osborne earlier: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, 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 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 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 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.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.
UpdatedUpdated
at 2.25pm BSTat 2.25pm BST
2.20pm BST2.20pm BST
14:2014:20
Private investors are seeing the day’s falls as a buying opportunity according to investment manager Hargreaves Lansdown.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: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.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.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.
2.09pm BST2.09pm BST
14:0914:09
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 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 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.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?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?
WSJ's Hilsenrath: #Brexit means Fed likely to delay rate increases. Markets see higher chance for rate cut than hike pic.twitter.com/Z2sLlZDedXWSJ's Hilsenrath: #Brexit means Fed likely to delay rate increases. Markets see higher chance for rate cut than hike pic.twitter.com/Z2sLlZDedX
UpdatedUpdated
at 2.14pm BSTat 2.14pm BST
2.08pm BST2.08pm BST
14:0814:08
Jill TreanorJill Treanor
Morgan Stanley is denying that it is moving 2,000 staff out of the City, as the BBC is reporting.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
at 2.54pm BST
2.03pm BST2.03pm BST
14:0314:03
Morgan Stanley 'moving 2,000 staff out of London'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.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.
Sources at Morgan Stanley tell BBC it's already begun process of moving 2,000 London based investment banking staff to Dublin or FrankfurtSources at Morgan Stanley tell BBC it's already begun process of moving 2,000 London based investment banking staff to Dublin or Frankfurt
We’re looking into it now.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.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.
2.00pm BST
14:00
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.
Pound's Brexit decline among biggest of any currency over 40 years https://t.co/6NhTX5IQzM pic.twitter.com/1pOKDqWQEK
1.57pm BST
13:57
Dominic Rushe
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.
1.47pm BST
13:47
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.
G7 central banks have taken steps to ensure adequate liquidity and to support functioning of markets
It was a hard fought campaign. It is not the outcome I wanted but I respect decision of British people and will do all I can to make it work
1.41pm BST
13:41
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
at 1.41pm BST
1.38pm BST
13:38
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:
Just briefed G7 finance ministers and bank governors on outcome of EU referendum. They all respect the decision of the British people
Discussed with G7 colleagues market consequences of UK's decision to leave EU. @hmtreasury and @bankofengland monitoring situation closely
1.33pm BST
13:33
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.
Thomas Cook suspends online currency transactions https://t.co/L93e81nVPw
1.16pm BST
13:16
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.
1.07pm BST
13:07
JP Morgan's Flanders: Marine Le Pen will be happy
Julia Kollewe
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....
Related: European far right hails Britain's Brexit vote
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.”
12.53pm BST
12:53
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.”
12.45pm BST
12:45
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.