Article / 24 June 2016 at 7:00 GMT

Morning Markets: UK turns its back on Europe

Former managing editor, / Saxo Bank



  • Germany June IFO Business Climate                                                       (0800 GMT)
  • US May Durable Goods Orders                                                                 (1230 GMT)
  • US June University of Michigan Consumer Survey                                   (1400 GMT)

It's really happened. Britain has voted to leave the European Union by a 52% to 48% count and decimated sterling — quite literally — to send GBPUSD to its lowest level since 1985.

GBPUSD fell more than 10% from a 1.50 high shortly after the polls closed to hit a low of 1.3229 before recovering some of its equilibrium in the hour before Europe opens. GBPUSD was at 1.3652 at 0611 GMT.

The Bank of England is on high alert and almost certain to intervene to shore up markets and mitigate against the panic that is likely to send the FTSE to an 8% plus plunge on the open.

Other European indices are slated for at least a 7% fall on the open, brokers report.

Gold topped $1,350/oz before consolidating around the $1,320/oz mark. XAUGBP also raced beyond the key £1,000/oz mark during the Asian session as safe-haven flight to the precious metal and an exodus of sterling longs created a perfect storm to send the pair racing higher.

USDJPY also took out the 100.0 handle overnight on the back of the flight to safety before returning to the 102.0 plus mark in the hour before the European open. Government bonds were also in demand with US 10-year Treasuries climbing and US two-year yields collapsing 0.25% to 0.54.

The euro was also under pressure sending EURUSD to
below 1.09 during the Asian session before returning back above the 1.10 handle in the runup to the European open.

K prime minister David Cameron now has a key decision to make after his referendum gamble failed dismally leaving his reputation and that of his chancellor Goerge Osborne in shreds and is set to make a statement as we publish. Just over one year ago, this column lauded Cameron for his spectacular triumph at the UK elections, but his stomach for the fight may be gone now that he has failed to see the 'Bremain' camp through to victory.

In Brussels, the very foundations of the European Union will also have been shaken to the core as the glue that has held the union together begins to unravel. The European ideal faces its biggest challenge since the collapse of the Berlin Wall and Brussels must now be fearful of a domino effect.

Division and discord rules the day. The UK needs to mend bridges within. Europe needs to find a process to manage a change it hoped would never come.

Market signals

Asian session

  • The impact of the strong Brexit lead left Asian investors alarmed and stocks tumbling
  • Futures markets were pointing to a 6% fall for FTSE at open
  • Gold hit a fresh 22-month high at $1318/oz on the UK vote; XAUGBP is off the chart
  • A surge in the yen clear shows how the UK vote outcome will hurt Japan
  • The Nikkei 225 was down by a stunning 8.01% to 14,937.35 at 0507 GMT
  • The Shanghai Composite was down 2.11 % to 2,831.00 at 0501 GMT
  • Hong Kong's Hang Seng was down by a hefty 4.88% 0530 GMT
  • Korea's Kospi Composite was down 3.8% to 1,911.26 at 0506 GMT
  • India's S&P BSE Sensex was down 3.48% to 26,063.80 at 0525 GMT
  • The ASX fell sharply on the strong leave vote; the big banks fell heavily
  • The S&P/ASX200 was down by a worrying 3.57% to just 5,092.30 at 0526 GMT
Forex ahead
  • The pound nosedived against the US dollar as the leave vote gained momentum
  • The pound was worth just 1.3377 at 0459 GMT, down by a staggering 8% plus
  • The yen soared soared against the euro as the leave camp's prospects improved
  • The euro was worth just ¥111.4524 at 0449 GMT
  • The US dollar appears to be heading to ¥100; it was worth only ¥101.4165 at 0450 GMT
  • The tumbling currencies are likely to prompt central banks to step in
  • The Australian dollar fell as leave gained ground; it was worth just 0.7333 at 0500 GMT

From the Floor

Dunkirk spirit. "Once again, the UK has come to Europe’s rescue”, says Jakobsen

1985 again. “Cable has hit an unprecedented, generational low”, says hardy

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Populist surge
Scare mongering has pushed UK voters to opt for a Brexit, and the result will give momentum to anti-establishment campaigns in Spain and France, predicts Steen Jakobsen.

Stock panic likely
The Stoxx 50 is likely to fall by 9% to 11% this morning in an opening panic, and the equity selloff will create some big opportunities in equities, says Peter Garnry

Call it quits
Votes are still being counted but the 'Brexit' camp is already getting ready to celebrate with the BBC, ITV and Sky all calling it in favour of the UK leaving, says Martin O'Rourke

Trump's hopes
The shock result of the UK referendum is out and US presidential hopeful Donald Trump will like the outcome, says Martin O'Rourke.

When the UK vote fog clears away, Juhani Huopainen reminds us that there are plenty of other important matters to consider, including US durable goods orders


It will take time for global markets the impact of the stunningly strong leave vote to play out; it has already dragged stocks sharply lower across Asia, and sent the yen soaring. Photo: iStock

Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
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Clare MacCarthy Clare MacCarthy
Just now: "What doesn't kill you makes you stronger." Donald Tusk, President of the European Council
Martin O'Rourke Martin O'Rourke
British banks are taking a hammering at the open. Barclays, RBS and Lloyds Bank Group were all down by around 30%.
Martin O'Rourke Martin O'Rourke
FTSE is down 7.5%
Clare MacCarthy Clare MacCarthy
UK prime minister David Cameron will resign in October. He'll remain in charge for the time being "to steady the ship", he tells the BBC. He will not invoke article 50 of the Lisbon Treaty immediately (the clause that puts a 2-year fixed deadline between a decision to leave the EU and departure becoming final).
Martin O'Rourke Martin O'Rourke
Steadying the ship or deserting the ship perhaps. Cameron was irresponsible calling the referendum in the first place as part of a cheap manifesto pledge. It may be a good thing for Europe in the long run, and I stress the 'may', but I can't see much good coming of this for the UK.
Martin O'Rourke Martin O'Rourke
Bank of England governor Mark Carney sets aside £250 billion to provide liquidity and states "we will not hesitate to take any additional measures required".


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