World stocks routed on Brexit Sensex plunges 605 points

More than $2 trillion wiped off

WORLD stocks saw more than $2 trillion wiped off their value on Friday as Britain's vote to leave the European Union triggered 5-10% falls across Europe’s biggest bourses and a record plunge for sterling.

Such a body blow to global confidence could 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.

Almost $1 trillion had been lost from European share prices ahead of what is expected to be a nearly 4% fall on Wall Street when it opens later.

London’s FTSE dropped almost 5% while Frankfurt and Paris fell 6-8%. Italian, Spanish and European bank stocks headed for their sharpest oneday drops ever.

Worries that other EU states could hold their own referendums were compounded by the fact that markets had rallied on Thursday, seemingly convinced the UK would vote to stay in.

Britain's big banks took a $100 billion battering, with Lloyds, Barclays and RBS plunging as much as 30% at one point.

The British pound dived by 18 US cents at one point, easily the biggest fall in living memory, to hit its lowest since 1985. The euro, in turn, slid 3% to $1.1050 as investors feared for its very future.

Having campaigned to keep the country in the EU, British Prime Minister David Cameron announced he would step down.

Results showed a 51.9/48.1% 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.

More angst came as Scotland's first minister said the option of another vote for her country to split from the UK — rejected by Scottish voters two years ago —was now firmly on the table.

Sterling sank a staggering 10% at one point and was last down 8% at $1.3667, 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,” he added.

That message was being broadcast loud and clear. The Bank of England, European Central Bank and the People's Bank of China all said they were ready to provide liquidity if needed to ensure global market stability. Reuters With global financial markets not having pencilled in a Brexit, the rout in global stock markets on Friday was a severe one. In India, the Sensex crashed more than1,000pointsbeforerecovering some ground to end the session at 26,397.71, a loss of well over 2% or 605 points.

As Andrew Holland, CEO, Ambit Investment Advisors, pointed out, the UK exiting the EU might have far reaching effects on the world economy, including that of India's, and it was way too early to gauge them accurately. “It's a huge negative shock. The ramifications are far reaching. Globally, central banksaredictatingpoliciesand people are tired. The fear now is Europe could disintegrate.”

Even after Friday's selloff, the Indian market continues to trade at a significant premium toitspeers,marketparticipants point out.