Brexit: stunned traders in shock as chaos reigns

Desicion for UK to leave EU astonishes analysts, traders and economists alike as Brexit stuns world.

Traders from BGC, a global brokerage company in London's Canary Wharf financial centre react as European stock markets open early June 24, 2016 after Britain voted to leave the European Union in the EU BREXIT referendum. REUTERS/Russell BoyceShow less

The unforeseen decision by the United Kingdom to leave the European Union was greeted with blanket sell-offs as investors pulled cash amid a growing sense of panic. Below is a timeline of reactions as the outcome became clear:

All times UAE

3.30pm

Stocks in Greece, Italy and Spain tumbled the most in the world as investors fled what are perceived to be the region’s riskier markets.

Stocks in so-called peripheral nations led declines as European equities headed for their worst day since 2008. The ASE Index plunged 16 per cent, the most out of 94 indexes tracked by Bloomberg. Spain’s IBEX 35 Index and Italy’s FTSE MIB Index followed with losses of more than 12 per cent. Portugal’s PSI Index dropped 10 per cent.

Periphery stocks are now seen as most vulnerable because of their weaker fiscal positions and higher unemployment, said Guillermo Hernandez Sampere, the head of trading at MPPM.

“Lower growth would be a disaster for those countries,” he said. Southern European companies “depend upon the perception of support from the process of European integration and this integration got hit hard this morning. They’ll probably continue to underperform as volatility will remain high for a few days.”

Adding to the uncertainty, Spain holds elections on Sunday, with polls forecasting no outright winner, fueling speculation about its economic path as political leaders negotiate to form a government. If anti-austerity party Podemos overtakes the socialist party as the second-biggest political force after the acting prime minister Mariano Rajoy’s People’s Party, that will also drag on stocks, Mr Sampere said.

Lenders led the retreat among the region’s equities, with Greece’s Eurobank Ergasias and Alpha Bank tumbling about 30 per cent, for the biggest declines on the Stoxx Europe 600 Index.

2.33pm

The Stoxx Europe 600 Index sank 6.7 per cent at 10:29am in London, joining a global market sell-off. The FTSE 100 Index slid 4.8 per cent, heading for the biggest losses since 2009.

The volume of shares changing hands on the European gauge was five times higher than the 30-day average, while it was sevenfold for the British measure. A gauge of euro-zone volatility was up 12 per cent, after earlier jumping as much as 32 per cent. All 19 Stoxx 600 groups fell today, with banks and insurers slumping the most. The Brexit results are reversing a rebound that lifted the benchmark by 7.8 per cent in the past five days.

“This is a historic moment and we’re looking into uncharted territory as to how far stocks can fall,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “We expect a lot of volatility in the coming days. Banks will be the most hit, as we have a long period of uncertainty ahead with questions on how much will this affect the UK economy and whether there will be copy-cats in the rest of Europe.”

2.30pm

US stock futures fell sharply in premarket trading on Friday.

S&P 500 futures and Nasdaq futures were both down about 3.6 per cent, while those on the Dow Jones industrial average were off 2.8 per cent.

The drops suggested Wall Street will open with steep losses, with the historic referendum delivering the biggest shock to the global financial system since the 2008 financial crisis.

1.40pm

Shares in the UK’s home builders fell the most since before the financial crisis after the nation voted to leave the European Union, with shares in Redrow leading the slump after falling as much as 76.6 per cent, the most in more than 20 years.

“It was going to be a bad day because people’s expectations for the economy are weaker and there is a lot of political uncertainty around,” said Charlie Campbell, an analyst at Liberum. “Homes are discretionary purchases and sentiment has moved from people being pretty bullish on the sector so I suspect there is a bit of over reaction.”

Shares in Barratt Developments were down 26 per cent, London’s largest homebuilder Berkeley Group fell 19 per cent and Redrow was down 40 per cent at 8:21am in London trading.

1.35pm

European shares, led by the region’s banks, felt the full force of Britain’s vote to leave the European Union on Friday, falling by 7 per cent as shockwaves spread across global markets.

Sterling hit a 31-year low in its biggest-ever fall and Japan’s Nikkei dropped 7.9 per cent. In Europe, the slide in stocks wiped off about €650 billion (Dh416.98bn) from the market value of Europe’s listed shares.

The pan-European FTSEurofirst 300 was down 7.3 per cent at 1,261.23 points by 07.56 GMT after falling as low as 1,241.94, while the broader STOXX Europe 600 index was down 7.5 per cent. Britain’s blue-chip FTSE 100 fell 4.3 per cent, with volumes hitting more than 100 per cent of their 90-day daily average in just one hour of trading.

“The single-largest macro risk for Europe this year … has crystallised,” Goldman Sachs said in a note. “The decision lowers the growth outlook for the UK and Europe amid heightened policy uncertainty and threatens tighter financial conditions.”

Euro-zone banks fell 14.5 per cent and were on track for their biggest ever one-day fall on concerns over the fall-out of the vote on a regional economy already struggling with low growth. European insurers were down 12.7 per cent, while auto shares fell 10.5 per cent.

Barclays, Royal Bank of Scotland and Lloyds plunged 16.6 to 20 per cent. The gold producers Randgold Resources and Fresnillo rose more than 11 per cent on expectations that gold, seen as a haven asset, will rise further.

“There is the potential for knock-on consequences for market-moving issues like trade, labour mobility and foreign investment,” said Rick Lacaille, the global chief investment officer at State Street Global Advisors.

“How the EU strikes a balance between facilitating a swift UK exit to reduce risk as quickly as possible, and discouraging similar movements in other countries, will be important.”

11am

Disbelief and shock hit financial trading rooms on Friday as Britain voted to leave the European Union in a decision that sparked upheaval across Asian markets.

Sharemarkets in the region spiralled into the red after early forecasts during morning trade that Britons would choose to stay in the grouping gave way to results pointing towards an exit.

“We all read the same information, we all watch the same screens and clearly the betting companies didn’t have this one,” said Westpac bank’s global FX strategy head Robert Rennie of the result, which saw the Australian market dive almost 4 per cent at one point.

“The polls didn’t have this one and much of the economic and strategy community, including myself to be fair, didn’t have this one as well.

“So I think this [mood] is one of disbelief that this could happen right here, right now.”

In Tokyo, Yosuke Hosokawa, who heads Sumitomo Mitsui Trust Bank’s currency sales team, said he had not seen “such a chaos in a while” as the British pound plummeted in response to the result.

“Players can’t help but selling the (pound) until authorities say stop it, meaning intervention. All the markets shrank.

“The focus is now moving to the aftermath of the impact. The market will ask, ‘Is Europe alright?’,” Mr Hosokawa said.

“This may be the beginning of a collapse of the EU framework. The impact is not small.”

The UBS global macro strategist Joakim Tiberg said while markets had considered the impact of Brexit, “deep down inside, I don’t think people actually believed in it”.

“I certainly didn’t believe in it. I’m quite shocked,” he said.

Mr Tiberg said market attention would now turn to the reaction to international leaders and institutions, including in Europe, and central bankers as they enact their contingency plans.

Mr Rennie, a Scotsman who has lived in Australia for 16 years, said the decision was set to cast a long shadow over global markets and economies, but noted negotiations for Britain to leave the union were likely to chart a two-year path.

“Nigel Farage emphasised in his earlier speech that dawn is breaking on a newly independent UK. I don’t think it is,” he said.

“A lot of has to happen before that is the case.”