Britain’s shock vote to leave the European Union roiled global markets for a second day yesterday, hammering US and European banks, lifting bond and gold prices, and dragging the British pound to a 31-year low.
US stocks opened sharply lower, following European markets, pulled down by financial stocks amid uncertainty over London’s future as the region’s financial capital.
The S&P financial index fell 2.5 per cent. JPMorgan was down 3.3 per cent while Bank of America was down 5.3 per cent.
The Dow Jones industrial average fell 295.06 points, or 1.7 per cent, to 17,105.69, the S&P 500 lost 39.83 points, or 1.95 per cent, to 1,997.58 and the Nasdaq Composite dropped 110.39 points, or 2.34 per cent, to 4,597.59.
An index of European bank shares fell 8.89 per cent. Royal Bank of Scotland fell 16 per cent while Barclays shed 18 per cent.
Italian banks also suffered. UniCredit fell more than nine per cent. The government was looking at options to help its banks and prevent further share price falls.
European stocks took a beating for a second day, down 3.7 per cent. Banks at a seven-year low helped push London’s top share index down by 2.5 per cent.
British finance minister George Osborne sought to reassure markets, saying the world’s fifth-largest economy was strong enough to cope with the Brexit-inspired volatility, but the positive impact on sterling was only fleeting.
MSCI’s all-country world stock index fell two per cent.
Yields on core government debt fell again. German 10-year bond yields, the benchmark for eurozone borrowing costs, fell as low as minus 0.11 per cent but held above Friday’s record low of almost minus 0.17 per cent.
In the scramble for safe-haven assets, benchmark US Treasury yields hovered near four-year lows. The 10-year note fell nearly 11 basis points to 1.47 per cent.
“The US remains a very powerful place where people can find a safe haven. Foreigners are also getting a kick with the rise in the dollar,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
Sterling fell more than 3.65 per cent to $1.310, surpassing its Friday low as yields on 10-year British government debt fell below one per cent for the first time.
The euro, also seen vulnerable to the exit from the EU of its second-largest economy, fell 1.2 per cent to as low as $1.098. The yen firmed as high as 101.52 per dollar.
The dollar index, which tracks the greenback’s value against six currencies, was up one per cent.
The rallying dollar helped drag oil prices down. Brent crude dropped more than two per cent to $47.35 before 12 noon EDT (16:00 GMT), while US crude slipped $1.12 to $46.52.
Brent and US crude futures have lost about seven per cent since Thursday’s settlement in the rush away from global risk assets.