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March 6, 2021
International News

Sterling, stocks skid as Brexit result agonizingly close

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Image: An employees of a foreign exchange trading company works as he is seen between British Union flag and an EU flag in Tokyo, Japan, June 24, 2016. REUTERS/Issei Kato

By Wayne Cole

SYDNEY (Reuters) – Carnage came to world markets on Friday as early voting returns suggested Britain was on the verge of leaving the European Union, threatening the existent of the entire bloc and its single currency.

The British pound collapsed over 5 percent against the U.S. dollar at one stage in wild trade, its biggest fall in living memory, while the euro slid 1.5 percent as investors feared for its future.

Sterling was last at $1.4420 , having earlier stretched to a high for the year at $1.5022. At it worse, the fall was even larger than during the global financial crisis and the currency was moving a cent or two in the blink of an eye.

“Sterling is getting smackadoodled,” said Tim Kelleher – Head of FX Institutional Sales New Zealand for ASB Bank in New Zealand. “While we thought it was all going to be “Remain”, it’s quite clearly not going to be as clear cut as that.”

Early official results showed the margins were nail-bitingly tight. Traders were particularly spooked by returns from Sunderland showing a large majority for the “Leave” camp and just a narrow win for “Remain” in Newcastle.

The largest cities had yet to report and were expected to lean to the “Remain” fold.

With 48 of 382 counting areas declared, the Leave camp was put at 49.4 percent against 50.6 percent for “Remain”.

Wild gyrations spilled across different asset classes and regions.

The safe-haven yen recouped early losses to stand at 104.70 per dollar , dragging Japan’s Nikkei <.N225> down 0.4 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> slipped 1 percent.

FTSE futures were indicated down 3.5 percent , while EMINI futures for the S&P 500 lost 1.2 percent.

Financial markets have been racked for months by worries about what Brexit, or a British exit from the European Union, would mean for Europe’s stability.

Early opinion polls had favored the “Remain” camp. An Ipsos MORI poll put the lead at 8 points while a YouGov poll found 52 percent of respondents said they voted to remain in the EU while 48 percent voted to leave.

Safe-haven bonds immediately came back into favor, with U.S. 10-year Treasury futures jumping a full point. Yields on the cash note fell 8 basis points to 1.66 percent.

Investors also priced in even less chance of another hike in U.S. interest rates <0#FF:> given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.

Commodities likewise swung lower as a Brexit would be seen as a major threat to global growth. U.S. crude shed $0.81 to $49.32 a barrel in erratic trade while Brent fell $0.63 to $50.30.

Copper slipped but gold rose about 2 percent thanks to its perceived safe haven status.

(Editing by Lincoln Feast)

Copyright 2016 Thomson Reuters. Click for Restrictions.

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