Global Markets In Turmoil After The U.K. Votes To Leave The EU

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The results from the historic EU referendum has now been declared and the United Kingdom has voted to leave the European Union. (Photo by Christopher Furlong/Getty Images)

The United Kingdom has voted to leave the European Union — and in the wake of this historic and stunning decision, UK prime minister David Cameron has announced his resignation, the pound sterling has plummeted to a 30-year low and global financial markets are in turmoil.

With 52% of the vote opting for a “Brexit,” global equity and currency markets are roiling. The FTSE, an index of 100 companies listed on the London stock exchange, is down 282 points, or 4.5%. The British stock market had opened its trading day down 7.5%. Germany’s DAX has plunged more than 700 points, or 7.2% — a slight improvement over the near-10% decline it was experiencing earlier Friday morning. France’s CAC index is down 383 points, or 8.6%. And the FTSE MIB, the stock index for Italy’s national stock exchange, is plummeting 1,880 points, or 10.5%.

The pound sterling has hit a 30-year low: it’s currently trading at 1.369, down 7.96% and well off the 1.50 mark it hit immediately after polls closed Thursday night. The Euro is down 3%; it’s trading around 1.10 in early Friday trading.

American markets aren’t immune from the pain, either. Dow futures are down 515 points, or 2.87%. S&P futures are pointing down 76.75 points, or 3.64%. And Nasdaq futures are down 161 points, or 3.68%.

The one area of the markets not seeing red? Gold. Future prices of the precious metal — which is inclined to jump when there is uncertainty in the market — have jumped 5%, or 63 points. It’s currently trading at $1326.20.

Market observers are warning that while the turbulence seen in Friday morning trading will eventually subside in the short-term, Britain’s vote to leave the European Union, a bloc of nations that has been in place since 1951, could carry longer-term consequences.

“While the vote to leave has immediate market implications, over the longer-term observers will be wary of the impact the vote has on other nationalist and protectionist movements – both in Europe and elsewhere. In Europe, nationalist parties will feature prominently in elections next year in Germany and France,” wrote State Street.
Global Advisors chief investment officer Rick Lacaille early Friday morning. He went on to note that in the weeks leading up to the vote, a host of international financial organizations like the IMF , World Bank and Bank of England laid out their concerns of what a UK exit from the EU could do to the world economy.

“These included risks to global growth, trade, foreign investment and financial market stability,” he said. “The exit vote realizes the potential for these projections to unfold.”

John Canally, chief economic strategist for LPL Financial, said in a note Friday morning that despite the global market volatility, individual investors should not panic.

“We continue to urge investors to take a long term view of their portfolios and base investment decisions on fact and not emotion. We do not think this is a ‘Lehman moment,’” he said. “While this event was unexpected, and likely to cause some near-term and even some longer lasting financial market volatility, we do not think this is another Lehman-like moment. The U.S. economy, U.S. banking system and U.S. consumer are in far better shape today than in 2008, and just yesterday, the Fed released data that showed all the 33 banks the Fed stress-tested passed the test under the worst-case scenarios.”

Source :

Forbes

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