Global capital markets reeled yesterday after Britain voted to leave the European Union, with $2 trillion in value wiped from equity bourses worldwide, while money poured into safe-haven gold and government bonds. Sterling suffered a record plunge to a 31-year low.

The blow to investor confidence and the uncertainty the vote has sparked could keep the Federal Reserve from raising interest rates as planned this year, and even spark a new round of emergency policy easing from major central banks.

The move blindsided investors, who had expected Britain to vote to stay in the EU, and sparked sharp repricing across asset classes. Mainland European equity markets took the brunt of selling as investors feared the vote could destabilise the 28-member bloc by prompting more referendums.

The traditional safe-harbour assets of top-rated government debt, the Japanese yen and gold all jumped. Spot gold rose nearly five per cent and the yield on the benchmark 10-year US Treasury note fell to lows last seen in 2012 at 1.5445 per cent.

Stocks tumbled in Europe. Frankfurt and Paris each fell six per cent to eight per cent.

Italian and Spanish markets, and European bank stocks overall were headed for their sharpest one-day drops ever. London’s FTSE, however, dropped 2.3 per cent, with some investors speculating that the plunge in sterling could benefit Britain’s economy.

Britain’s big banks took a $100 billion battering, with Lloyds, Barclays and RBS plunging as much as 30 per cent, though they cut those losses in half later in the day.

Stocks on Wall Street opened more than two per cent lower, with the Dow Jones industrial average dropping as much as 538 points. The Dow Jones industrial average fell 463.63 points, or 2.57 per cent, at 17,547.44, the S&P 500 lost 57.03 points, or 2.7 per cent, at 2,056.29 and the Nasdaq Composite was down 153.38 points, or 3.12 per cent, at 4,756.67.

MSCI’s all-country world stock index fell 3.8 per cent.

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

Sterling was last down 7.6 per cent at $1.3751, 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.

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.

Europe’s safety play, the 10-year German government bond, surged with yields tumbling back into negative territory and a new record low.

Oil prices slumped by more than four per cent amid fears of a broader economic slowdown that could reduce demand. US crude shed $2.02 to $48.09 a barrel while Brent fell 4.3 per cent to $48.70 before.

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