A British vote to leave the European Union braced markets for one of their most unstable days on Friday, with sterling hitting a 31-year low in its biggest fall in history.
Such a body blow to global confidence reflects a widespread alarm in the financial community since the Brexit vote could well prevent the Federal Reserve from raising interest rates as planned this year.
Billions were wiped from share values as Financial Times Stock Exchange futures fell 7 percent FFIc1, EMINI S&P 500 futures ESc1 5 percent and Japan’s Nikkei .N225 7.6 percent. European stock markets were set to open more than 10 percent lower STXEc1.
Following the FTSE drop, the British pound collapsed no less than 18 U.S. cents, marking the lowest since 1985, and marking a decline greater than anything seen since free-floating system of exchange rates was introduced in the early 1970s.
London bankers working through the night said they hadn’t seen anything like the volatility sweeping across UK assets.
“The word ‘unprecedented’ is often used too much, and people often reach for the hyperbole. But this is truly unprecedented,” said Steven Major, head of global rates strategy at HSBC in London.
“It’s an extraordinary move for financial markets and also for democracy,” said co-head of portfolio investments of London-based currency specialist Millennium Global Richard Benson.
“The market is pricing interest rate cuts from the big central banks and we assume there will be a global liquidity add from them in the next few hours,” he added.
The shockwaves affected all asset classes and regions.
The safe-haven yen sprang higher to stand at 102.15 per dollar, having been as low as 106.81 earlier. The dollar decline of 4 percent was the largest since 1998.
That provoked cautions from Japanese officials that unwarranted forex moves were unwelcome.
Moreover, other currencies across Asia and in Eastern Europe suffered severely as it woke up on concerns that alarmed investors could pull funds out of emerging markets.