Abu Dhabi: Britain’s unprecedented move to exit the European Union rocked financial markets on Friday, with equities across the world plunging as investors turned to safe havens like gold.
The Dow plunged more than 500 points in opening trade. About five minutes into trade, the Dow Jones Industrial Average stood at 17,500.74, down 510 points, or 2.8 per cent.
The broad-based S&P 500 fell 2.7 per cent to 2,055.42, while the tech-rich Nasdaq Composite Index dropped 3.5 per cent to 4,737.79.
But it was the sterling that bore the brunt of the Brexit vote, with the currency falling 10 per cent to its lowest value since before 1985. Shortly after the results of the referendum vote came out, the sterling reached a low of around $1.32 (Dh4.84). At 5pm (UAE time), the currency was 8.11 per cent down at $1.3670.
A Reuters poll later in the day showed that the sterling was expected to fall 6.6 per cent to as low as $1.28 in the coming three months.
Meanwhile, on the equity front, European indexes fell no less than six per cent. In the first two hours after markets opened, Germany’s DAX was down over seven per cent to 9,524, with the index’s drop at 6.74 per cent at 5pm (UAE time) to reach 9,565.66.
Similarly, France’s CAC 40 fell as much as 10 per cent in early trade. It was down 8.25 per cent at 4,097.3 at 5pm (UAE time). The FTSE 100, which nosedived 8.7 per cent as soon as it opened to a low of 5,788.74, also managed to show some improvement later, reaching 6,107.92 at 5pm (UAE time) — a 3.47 per cent drop.
The Bank of England responded, saying that it would take all necessary steps to secure monetary stability.
The domino effect reached across the pond to the US where the S&P 500 and Nasdaq futures fell five per cent early Friday ahead of market opening hours.
In Asia, all was red, too, as the Nikkei 225 index ended the day 7.92 per cent lower, falling nearly 1,300 points to 14,952 and reaching a low of 14,864. Hong Kong’s Hang Seng Index fell 2.92 per cent to 20,259 having managed to bounce from Friday’s low of 19,662.
India’s benchmark index saw its biggest drop in nearly four months, with Tata Motors dropping the most since 2012. Tata Motors, whose Jaguar Land Rover unit gets a quarter of its sales from Europe, plunged 7.9 per cent, the worst performer on the S&P BSE Sensex.
The flight from equities led investors to what they consider safe havens like gold, which rallied the most since the financial crisis in 2008. Another safe haven, government bonds advanced, with the price on the German benchmark 10-year sovereign bond rising sharply as UK government bonds also jumped, taking their 10-year yield to a historic low.
Oil prices tumbled to reach a low of $47.5 per barrel for Brent crude, reaching $48.34 — a 5.05 per cent decline at around 5pm (UAE time).
— With inputs from AFP
