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-harbors of top-rated government debt, Japanese yen and gold.
Billions were wiped from share values as FTSE futures fell 7 percent FFIc1, EMINI S&P 500 futures ESc1 5 percent and Japan’s Nikkei .N225 7.6 percent. European stock markets were set to open more than 10 percent lower STXEc1.
The British pound collapsed no less than 18 U.S. 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 EUR= 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 Two.
Sterling sank a staggering 10.1 percent at one point and was slumped at $1.3582 GBP=, 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.