LONDON, June 24 (UPI) — The value of the British pound fell by more than 10 percent Friday, and London’s leading stock index declined in the wake of Britain’s decision to leave the European Union.
With the opening bell, the fell by more than 8 percent before making some gains later in the morning. Bank stocks were particularly weak, with Barclays and RBS stock dropping about 30 percent before market corrections reduced those losses to about 17 percent. As the outcome of the countrywide referendum indicated Britons preferred to withdraw from the EU, the British pound fell about 10 percent, to $1.3236, its lowest value since 1985.
Hours later, immediately prior to the opening bell at the New York Stock Exchange, the Dow Jones Industrial average fell by about 500 points, or 2.7 percent of its collective value. New York’s S&P 500 and Nasdaq were set to open about 3.5 percent lower; Germany’s DAX index started the day off by 6.3 percent. Japan’s Nikkei index dropped nearly 8 percent.
The Euro, currency of most EU countries but not Britain, is also down against all major currencies.Values of gold and U.S. government bonds were pushed upward Friday as investors moved their money into less volatile areas.
Stock indices around the world opened lower because of the decision to withdraw, nicknamed a Brexit, or British exit from the EU. While a close vote was predicted, the result nonetheless came as a shock, despite assurances from Mark Carney, Bank of England governor. His statement attempted to assure investors and savers, saying the bank was “well prepared” for the referendum’s outcome and is prepared to reinforce the national economy.
The bank reserved $344 billion to stabilize the economy.
Britain’s actual separation from the 28-nation trading and political bloc will take up to two years, following a protocol outlined in the EU constitution, but British Prime Minister David Cameron, a proponent of remaining in the EU, announced he will resign his position in October.
“This is simply unprecedented, the pound has fallen off a cliff and the FTSE is now following suit. Britain’s EU referendum has been a cloud hanging over the global economy for the past few months and that cloud has got very dark this morning. The markets despise uncertainty, yet that is exactly what they’re faced with this morning,” Dennis de Jong of the British stock trading company UFX.com told the BBC.
Proponents of the choice to leave the EU used nativist and nationalist sentiment to gather votes; EU membership means following more orders from the Brussels assembly and fewer from London, such as those regarding placement of refugees. The policies include a free exchange of labor between EU countries, meaning workers from less-prosperous EU nations are seeking work in Britain.
The issue of sovereignty, of whether the EU or Britain rules Britain, helped prompt 52 percent of voters Thursday to reject EU membership.
The vote will also reorder EU priorities and procedures; it will lose a major military and diplomatic power, and Frank-Walter Steinmeier, German foreign minister, commented, “This looks to be a sad day for Europe and for Britain. “
