Jun 2016 Financial News

Winners and losers after British ‘leave’ vote

Jun 27, 2016

NEW YORK—Britain's decision to leave the European Union had a huge effect on financial markets Friday, sending many assets plunging and a few soaring as traders try to gauge the fallout for the British and European economies and beyond.

Investors aggressively sold stocks in Europe, Asia and the US as well as the British pound, and piled into safeplay investments like US government bonds, utility stocks and gold, sending those prices higher.

LOSERS

THE POUND: The British pound took a huge loss, plunging more than 10 per cent from about US$1.50 to US$1.35, before recovering somewhat, as investors worried that Britain's departure would hurt its economy and diminish London's role as a global financial hub. The pound touched its lowest level since 1985.

BANKS: Many banks use London as a centre for European operations, but that's likely to change as Britain extracts itself from the EU. Also, long-term interest rates are dropping as investors pile into US government bonds, making lending less profitable. US banking stocks fell far more than the rest of the market. Industry bellwether JPMorgan Chase tumbled 6 per cent.

ASIAN STOCKS: Asian stocks were the first to react to the vote and they took huge losses. Japan's Nikkei 225 plunged 7.9 per cent after a wild day of trading, its biggest loss since the financial crisis.

EUROPEAN STOCKS: European stocks also tumbled, although indexes on the European continent took larger losses than British ones. France's CAC 40 lost 8 per cent and Germany's DAX fell 6.8 per cent. Britain's FTSE 100 fell 3.1 per cent, with homebuilders suffering huge losses.

CRUDE OIL: Oil prices fell more than 4 percent as investors worried the move will slow down global economic growth. Benchmark US crude dropped US$2.18, or 4 per cent, to US$47.92 a barrel in New York.

THE EURO: While Britain never adopted Europe's common currency, the vote to leave got investors worried that the EU could weaken as an economic bloc if other countries also decided to leave, or to postpone joining. The euro fell to US$1.1157 from US$1.1351.

WINNERS

GOLD: The most famous "safe" investment of all, gold made its biggest jump in months. Gold is now trading at its highest price since July 2014. The price of an ounce of gold rose US$59, or 4.7 per cent, to US$1,322. That followed five days of declines as investors hoped that Britons would vote to remain in the EU.

BONDS: Investors bought US government bonds, which are considered an ultra-safe investment that tends to hold its value and is easy to buy and sell. The yield on the ten-year U.S. Treasury note plunged to 1.58 per cent from 1.75 per cent a day earlier, a huge move. Bond yields are used to set interest rates on many kinds of loans including mortgages.

HIGH-DIVIDEND STOCKS: Stocks that are similar to bonds also did well. Utility companies and phone companies pay big dividends compared to most other kinds of stocks. That means investors get more cash and the stocks are more stable. Utility stocks were the only one of the 10 sectors in the S&P 500 index to rise on Friday.

THE DOLLAR: The dollar, which is already very strong relative to other currencies, got even stronger. The ICE US Dollar index, which measure the dollar against a group of other world currencies, rose more than 2 per cent. (AP)

Source:
Trinidad Guardian, A14
Saturday June 25, 2016