Suffolk shareholders are today watching in fear as more than £100bn was wiped off London’s FTSE 100 index within minutes of markets opening after Britain’s decision to leave the European Union.
London’s premier index plunged 458 points to 5,880, down 7.19%, as experts warned of more carnage to come, although the market clawed its way back above the 6,000 during the first hour of trading.
The pound also crashed 8% against the dollar, falling from 1.50 US dollars to 1.36.
Banks bore the brunt of the fall, with Barclays down 27%, Royal Bank of Scotland down 28% and Lloyds taking a 24% dive.
Dennis de Jong, managing director of UFX.com, said: “This is simply unprecedented. The pound has fallen off a cliff and the FTSE is now following suit. Britain’s EU referendum has been a cloud hanging over the global economy for the past few months and that cloud has got very dark this morning.
“The markets despise uncertainty, yet that is exactly what they’re faced with this morning. The shockwaves are likely to reverberate for some time and the warning lights are flashing brighter now than ever.”
The Bank of England has said it will take “all necessary steps” to ensure monetary and financial stability in the wake of the Brexit vote.
In an initial response, the bank said: “The Bank of England is monitoring developments closely.
“It has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks. The Bank of England will take all necessary steps to meet its responsibilities for monetary and financial stability.”
Bank of England governor Mark Carney later added that volatility “can be expected” in the wake of the Brexit vote but said bank was prepared to provide £250bn to support markets.
He said: “Some market and economic volatility can be expected as this process unfolds. As a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250 billion of additional funds through its normal facilities.”
“The bank will not hesitate to take additional measures as required as markets adjust and the UK economy moves forward.”
Mr Carney also offered reassurance that there will be no immediate changes as a result of the vote.
He said: “There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold. And it will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world.”
He also said that the Bank has put in place extensive contingency plans and claimed that the “core of our financial system is well-capitalised, liquid and strong”.
“This resilience is backed up by the Bank of England’s liquidity facilities in sterling and foreign currencies. All these resources will support orderly market functioning in the face of any short-term volatility,” he added.
Rain Newton-Smith, chief economist at the CBI, said: “We need strong and calm leadership to reassure the markets.
“The Bank of England is clear that it stands ready to provide additional liquidity and to take other necessary measures – this should help to calm markets and shore up confidence in the UK economy.
“As the governor said, the UK’s financial system is resilient. UK banks are well-capitalised, with a large quantity of high quality liquid assets, and have been stress-tested against tougher conditions than where we are now.”
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