World stocks in freefall as UK votes for EU exit

An employees of a foreign exchange trading company works as he is seen between British Union flag and an EU flag in Tokyo, Japan, June 24, 2016. [Photo/Agencies]

LONDON/SYDNEY - A British vote to leave the European Union sent sterling plunging on Friday and hammered equities across the world as turmoil swept through global markets.

Such a body blow to global confidence could well prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all the major central banks.

Risk assets were scorched as investors fled to the traditional safe-harbours of top-rated government debt, Japanese yen and gold.

Billions were wiped from share values as FTSE futures fell 7 percent, EMINI S&P 500 futures 5 percent and Japan's Nikkei 7.6 percent. European stock markets were set to open more than 10 percent lower.

The British pound collapsed no less than 18 US cents, easily the biggest fall in living memory, to hit its lowest since 1985. The euro in turn slid 3.2 percent to $1.1012 as investors feared for its very future.

Nearly complete results showed a 51.8/48.2 percent split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War II.

Sterling sank a staggering 10.1 percent at one point and was slumped at $1.3582, having carved out a range of $1.3228 to $1.5022. The fall was even larger than during the global financial crisis and the currency was moving two or three cents in the blink of an eye.

"It's an extraordinary move for financial markets and also for democracy," said co-head of portfolio investments of London-based currency specialist Millennium Global Richard Benson.

"The market is pricing interest rate cuts from the big central banks and we assume there will be a global liquidity add from them in the next few hours," he added.

The shockwaves affected all asset classes and regions.

The safe-haven yen sprang higher to stand at 102.15 per dollar, having been as low as 106.81 at one stage. The dollar decline of 4 percent was the largest since 1998.

That prompted warnings from Japanese officials that excessive forex moves were undesirable. Indeed, traders were wary in case global central banks chose to step in to calm the volatility.

One source said the Bank of England was in touch with other major central banks ahead of the market open there and the Bank of Japan Governor Haruhiko Kuroda it was ready to provide liquidity if needed to ensure market stability.

Other currencies across Asia and in eastern Europe as it woke up suffered badly on worries that alarmed investors could pull funds out of emerging markets. Poland, where many of the eastern Europeans in Britian come from, saw its zloty slump 7 percent.

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