The FTSE 100 has slumped by 8.3% following the UK’s vote to leave the European Union in yesterday’s referendum, while government bond yields have fallen to record low levels. Markets will also now be digesting the news Prime Minister David Cameron has announced his resignation. He said this morning he hopes a new leader will be in place by the time of the Conservative Party Conference in October.
The FTSE has dropped to 5,811 in early trading, while the yield on the benchmark 10-year UK government bonds has seen a drop of 0.31 percentage points to a record low of 1.07%, in line with dramatic falls in yields on US and German government debt.
In Europe, the EuroStoxx 50 is down 6.5% to 2,841, with the Italian FTSE MIB is 3.9% lower, the Spanish IBEX 35 down 8.2%, the French CAC 40 falling 7.4% and Germany’s DAX 9.7% lower.
Bonds across the globe are seeing inflows on the back of widespread risk aversion, with yields on 10-year US treasuries close to four-year lows of 1.49%, while 10-year German bund rates are down at -0.17%, and Japan’s benchmark down at -0.185%.
The pound has also fallen some 10% against the dollar to the lowest level since 1985 overnight following the United Kingdom’s decision to leave the European Union in yesterday’s referendum.
At one point sterling hit $1.3305, and is currently trading 9.9% lower at $1.3408. Against the euro, the pound dropped 7% to around €1.2085…
[Source: Investment Week - by Daniel Flynn - June 24, 2016]
