Against all expectations (albeit the polls suggesting it was going to be close) UK held a referendum on 23 June and the decision was to exit from the European Union. David Cameron resigned as the Prime Minister, the stock markets tumbled and the value of the Pound Sterling fell almost 10% against the USD to levels not seen since 1985.
The United Kingdom referendum has left the country deeply divided with Scotland and London voting to remain in the EU but country regions and everywhere outside London, the result was in favour of Exit. The decision has sent the political parties into turmoil. While the ruling Conservatives will not only need to elect a new PM who will need to lead the "exit" with almost 49% of the voters electing to "remain", the opposition labour leader is also under enormous pressure to resign having been accused of leading a divided campaign. The European Union wants a swift British exit but the UK is in such a political turmoil and with David Cameron stating that the new leader will trigger the Constitutional change to commence the "exit" mechanism, it is unclear what the future holds. People in London have marched in the city signing petition asking for a second referendum while Scotland has put the referendum to exit the UK back on the table as it wishes to remain in the EU and oppose the UK decision to exit.
The uncertainty sent shock waves through the financial markets. Here's a summary of the carnage that followed:
GBP fell from 1.4877 USD to 1.3679. The highest the GBP traded v USD over 5 years was 1.7116 in July 2014. S&P 500 fell by 3.6%, NASDAQ by over 4%, London's FTSE 100 lost 3.2%, ASX 200 fell by 3.2% and the Nikkei in Japan fell by 8%. Global commodity prices fell as a result of the volatility in the markets and fears of further weakening of global growth. The AUD rose above 75 cents and then settled back to 74.65 US cents and at the time of writing of this post the dollar is trading at 74.14 US cents.
The Bank of England chief Mark Carney assured markets that it will provide more than GBP 250 billion to ensure the market remains liquid. Other central bank chiefs have also assured markets of providing continuing liquidity. Both S&P and Moody's have issued a "Negative" watch on UK's sovereign rating as expected. US Treasuries rallied with the 10 year yield falling by 21 basis points to 1.56%.
The United Kingdom referendum has left the country deeply divided with Scotland and London voting to remain in the EU but country regions and everywhere outside London, the result was in favour of Exit. The decision has sent the political parties into turmoil. While the ruling Conservatives will not only need to elect a new PM who will need to lead the "exit" with almost 49% of the voters electing to "remain", the opposition labour leader is also under enormous pressure to resign having been accused of leading a divided campaign. The European Union wants a swift British exit but the UK is in such a political turmoil and with David Cameron stating that the new leader will trigger the Constitutional change to commence the "exit" mechanism, it is unclear what the future holds. People in London have marched in the city signing petition asking for a second referendum while Scotland has put the referendum to exit the UK back on the table as it wishes to remain in the EU and oppose the UK decision to exit.
The uncertainty sent shock waves through the financial markets. Here's a summary of the carnage that followed:
GBP fell from 1.4877 USD to 1.3679. The highest the GBP traded v USD over 5 years was 1.7116 in July 2014. S&P 500 fell by 3.6%, NASDAQ by over 4%, London's FTSE 100 lost 3.2%, ASX 200 fell by 3.2% and the Nikkei in Japan fell by 8%. Global commodity prices fell as a result of the volatility in the markets and fears of further weakening of global growth. The AUD rose above 75 cents and then settled back to 74.65 US cents and at the time of writing of this post the dollar is trading at 74.14 US cents.
The Bank of England chief Mark Carney assured markets that it will provide more than GBP 250 billion to ensure the market remains liquid. Other central bank chiefs have also assured markets of providing continuing liquidity. Both S&P and Moody's have issued a "Negative" watch on UK's sovereign rating as expected. US Treasuries rallied with the 10 year yield falling by 21 basis points to 1.56%.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) *Iron Ore 60% MBIOI-IR index USD/t (Updated Wednesday) | As at 24-Jun 1.75 2.00 2.04 1.56 0.7387 0.6701 75.61 4.8895 5,066 2,037 17,400 2,854 48.00 1,331 45.15* | As at 17-Jun 1.75 2.00 2.13 1.61 0.7389 0.6570 77.11 4.8678 5,162 2,071 17,675 2,885 49.17 1,289 44.46* |
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