Financial markets plummet in response to surprise Leave vote

The Leave vote came as a surprise to the financial markets, as the last polls before the Brexit referendum had shown a small but fairly secure victory for the Remain side. Even the UK bookmakers had got it wrong, and in the days before the referendum some bookies offered odds of 2/9 on Remain, implying a 82 percent winning chance for that outcome. As such, the financial markets were generally unprepared for the final result, which therefore came as a huge shock to the international financial markets.

The British Pound dropped early on in the morning of June 24 from $1.50 to $1.33 against the US dollar, the lowest level since 1985. It stabilized a bit during the day, closing at $1.368. The international stock markets also saw huge losses, with the UK FTSE 100 dropping 8% in the first minutes of trading after the result of the referendum became known. While the FTSE 100 recovered somewhat, closing at 6,138 – a 3.15% drop – other markets took an ever bigger hit. The IBEX in Madrid dropped a massive 12%, while the CAC40 in Paris and Tokyo Nikkei index both dropped by about 8%. This would suggest that the UK market had, after all, made some provisions for a possible Leave victory, whereas the international markets were fully expecting UK to Remain.

According to CNBC, citing the S&P Dow Jones Indices, the international stock markets took a hit of a massive $2.1 trillion  – that’s $2,100,000,000,000 – within the first 24 hours of the Leave becoming official. Although the FTSE, somewhat surprisingly, outperformed other international bourses, some of the companies that took the largest hits were UK based banks such as Barclays and the Royal Bank of Scotland, both dropping by about 18 percent.

Please see below for the immediate effects of the Brexit vote on a number of major international markets trading on June 24:

See below for the Brexit effect on some key currency pairs: