The UK voted to leave the European Union last night, 52% to 48%. taking the market by surprise. All markets had discounted the possibility of a Leave vote going into the referendum, resulting is massive market moves once it became clear that Leave had won the day.
The GBP dropped nearly 14% at one point, from 1.49 down to 1.30. It is currently back up to 1.39.
Rates across the globe have rallied. The UST 10yr note is currently at 1.54%, and traded as low as 1.42%, after closing yesterday at 1.73%. German 10yr bonds are back into negative yield territory, having dropped to -.15%, although they have since sold off back to -.07%.
Stock markets have been crushed. The FTSE is down 271 points (4.3%) but is off the lows, having opened up down almost 600 points. Dow and S&P futures are down 472 and 71 points respectively. The UK financial sector has been hit particularly hard. Barclays and RBS were each down nearly 30% at one point. Eurpoean banks are down roughly 8% across the board.
Prime Minister David Cameron has already resigned. It is unclear who will replace him atop the Conservative Party, or whether he will call for a national election, but former London mayor Boris Johnson, who was a vocal Leave supporter, certainly has to be looking good. Populist leaders across Europe, from Sweden to France, are already calling for similar referendums in their own countries, although the likelihood of it happening any time soon is remote, especially given the complicating factor of the single currency, which the UK was never a part of. More probable is that people will wait to see how Britain’s exit plays out. But clearly this is a bad sign for the future of the European project.
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