Markets crash, pound plummets
Canadian assets fare better than most as investors rush to dump European shares
Global stock markets lost about $2 trillion in value on Friday and the pound plummeted to trade at a 31year low after Britain’s surprise vote to leave the European Union sent investors scurrying for safe-haven investments like gold and government bonds.
European stocks bore the brunt of the carnage, with the Stoxx 600 Index sliding 7 per cent in its worst day since the financial crisis that began in October 2008. Oil prices tumbled, along with most commodities, amid a global flight from risky assets. The Dow Jones industrial average and the S&P 500 suffered their biggest drop since last August and it was the worst fall for the Nasdaq since 2011.
The “leave” camp’s win in the U.K. referendum rattled markets as investors worried about the potential for wider political instability and an economic slowdown.
But on a day that shook global markets, Canadian assets fared relatively well. The loonie was the fifth-best performer among global currencies versus the soaring U.S. dollar, while the equity decline was the smallest among major markets.
Brexit had financial repercussions across the board. British pound/Euro/U.S. dollar The pound really paid the price. At one point, sterling slumped to its weakest level in more than three decades, before regaining some ground to $1.77 (Canadian), down 12.83 cents. It closed at $1.36 (U.S.), down 12.47 cents. The euro closed at $1.4413, down 1.24 cents (Canadian), and the U.S. dollar closed at $1.29, up 2.27 cents. Canadian dollar They don’t call it the Petrodollar for nothing. The price of West Texas Intermediate crude sank 4.4 per cent Friday, which weighed on the Canadian currency, traders said.
The loonie ended the day at 76.93 cents (U.S.), down 1.37 cents. European markets Stocks tumbled across Europe. Frankfurt and Paris markets fell nearly 7 per cent while the Italian and Spanish markets posted their sharpest one-day drops ever, falling more than12 per cent, led by a dive in European bank stocks.
The FTSE 100 fell 1.9 per cent but the FTSE 250, which is considered a closer barometer of the U.K. economy, fell 7.2 per cent. North American markets The S&P/TSX composite index fell 1.7 per cent, the Dow Jones industrial average plunged 3.4 per cent, the S&P 500 fell 3.6 per cent and the Nasdaq composite lost 4.1 per cent. Gold Gold surged the most since the height of the global financial crisis in 2008, despite the boost to the U.S. dollar (the two typically trade in opposite directions.)
As the pound tumbled against the U.S. dollar Friday, gold priced in sterling soared as much as 19 per cent. With files from Star wire services