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Wall Street joins global market sell-off as Brexit recession looms - live FTSE 100 closes 4% lower in global market sell-off as Brexit recession looms - live
(about 1 hour later)
7.05pm BST
19:05
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.
Everyone saying "that wasn't too bad today for the FTSE 100"... Try looking at it in dollar terms.
6.50pm BST
18:50
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.
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
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.
6.00pm BST6.00pm BST
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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: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.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: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.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: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.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.
5.43pm BST5.43pm BST
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European markets slump after Brexit voteEuropean 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.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.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.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.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 final scores showed:
On Wall Street, the Dow Jones Industrial Average is currently down 508 points or 2.82%, its worst daily performance (so far) since January.On Wall Street, the Dow Jones Industrial Average is currently down 508 points or 2.82%, its worst daily performance (so far) since January.
5.17pm BST5.17pm BST
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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.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.
4.51pm BST4.51pm BST
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The Brexit vote is not a Lehmans moment, according to Oxford Economics. It said: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.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.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.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.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.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.
4.35pm BST4.35pm BST
16:3516:35
Is this good or bad news?Is this good or bad news?
British referendum outcome doesn't impact @Eurovision presence of the UK. @BBCEurovision, be welcome next year! 🇬🇧https://t.co/W3azrJzBNqBritish referendum outcome doesn't impact @Eurovision presence of the UK. @BBCEurovision, be welcome next year! 🇬🇧https://t.co/W3azrJzBNq
4.28pm BST4.28pm BST
16:2816:28
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.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.Speaking at an IMF lecture with China’s central banker, she said she hoped for “as smooth as transition as possible”, according to Reuters.
4.04pm BST4.04pm BST
16:0416:04
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: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.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.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.
3.51pm BST3.51pm BST
15:5115:51
US presidential candidate Hillary Clinton has now commented on the Brexit vote, and cites the “special relationship” between the two countries. She said: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 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.We also have to make clear America’s steadfast commitment to the special relationship with Britain and the transatlantic alliance with Europe.
3.46pm BST3.46pm BST
15:4615:46
Julia KolleweJulia Kollewe
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: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.”“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.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.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.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.”“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.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]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.”“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.“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.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]“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.”“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.“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.”“I would not be surprised at all if the first thing that the new prime minister does is call a general election.”
3.25pm BST3.25pm BST
15:2515:25
Dominic RusheDominic Rushe
Back with the US, and the Securities and Exchange Commission issued this statement after Wall Street opened: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 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.
3.23pm BST3.23pm BST
15:2315:23
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: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).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.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.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.
3.18pm BST3.18pm BST
15:1815:18
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: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:
3.14pm BST3.14pm BST
15:1415:14
More reaction to the Brexit vote from across the Atlantic, this time from Treasury secretary Jacob Lew, and another statement designed to reassure: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.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.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 BST3.09pm BST
15:0915:09
The vote for Brexit will not immediately affect the Republic of Ireland’s credit rating, said ratings agency S&P: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).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.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.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.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.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.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.