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A rollercoaster ride for City traders on EU referendum night A rollercoaster ride for City traders on EU referendum night
(about 1 hour later)
As Nigel Farage strode into the Millbank tower around midnight for a post-referendum gathering, it was looking as if it might turn out to be a wake.As Nigel Farage strode into the Millbank tower around midnight for a post-referendum gathering, it was looking as if it might turn out to be a wake.
The Ukip leader’s City pals had told him remain had triumphed. They had backed their hunches with cash, sending the value of the pound up towards $1.50 as the polls closed at 10pm.The Ukip leader’s City pals had told him remain had triumphed. They had backed their hunches with cash, sending the value of the pound up towards $1.50 as the polls closed at 10pm.
No sooner had Farage arrived at Millbank, however, than the result from Sunderland came in - 61% for leave. It was the cue for him to get the party started. No sooner had Farage arrived at Millbank, however, than the result from Sunderland came in – 61% for leave. It was the cue for him to get the party started.
In the same building, 11 floors up, financial traders at the payments company World First were watching proceedings unfold on televisions and trading screens.In the same building, 11 floors up, financial traders at the payments company World First were watching proceedings unfold on televisions and trading screens.
Jeremy Cook, the firm’s chief economist and head of currency strategy, cautioned that if the vote was for Brexit it would trigger a “biblical” fall in the value of the pound. It proved to be one of the few calls the City got right all night.Jeremy Cook, the firm’s chief economist and head of currency strategy, cautioned that if the vote was for Brexit it would trigger a “biblical” fall in the value of the pound. It proved to be one of the few calls the City got right all night.
Related: Brexit vote leaves UK on brink of recession, economists sayRelated: Brexit vote leaves UK on brink of recession, economists say
After Sunderland, the pound began to lose its fizz. It was swiftly trading 4% cheaper, before then steadying at 2% lower for about an hour. “Sterling has collapsed … It can go a lot further,” Cook predicted.After Sunderland, the pound began to lose its fizz. It was swiftly trading 4% cheaper, before then steadying at 2% lower for about an hour. “Sterling has collapsed … It can go a lot further,” Cook predicted.
By 2am, as the BBC was saying Labour thought that leave might have won, sterling fell to $1.40, down 5%. An hour later the rout began. “We are through $1.35” shouted Cook, as screens showed Farage’s chirpy face at the party going on below. By 2am, as the BBC was saying Labour thought that leave might have won, sterling fell to $1.40, down 5%. An hour later the rout began. “We are through $1.35,” shouted Cook, as screens showed Farage’s chirpy face at the party going on below.
At 4am, sterling hit $1.3483, a 31 year low. One World First trader quipped that he had not been born the last time Britain’s currency changed hands at that level. Quirks were becoming commonplace. “Even the Zimbabwean dollar is up against the pound,” Cook noted.At 4am, sterling hit $1.3483, a 31 year low. One World First trader quipped that he had not been born the last time Britain’s currency changed hands at that level. Quirks were becoming commonplace. “Even the Zimbabwean dollar is up against the pound,” Cook noted.
Farage’s mood too was rising against that of his City friends who had called the outcome spectacularly wrong.Farage’s mood too was rising against that of his City friends who had called the outcome spectacularly wrong.
The City had convinced itself that the routine brag of the betting markets, which like to claim they are a more accurate predictor than opinion polls, was true.The City had convinced itself that the routine brag of the betting markets, which like to claim they are a more accurate predictor than opinion polls, was true.
Traders then waded into positions designed to profit from a vote for the status quo, sustaining their theories by referring to the odds, which had long suggested the chance of a Brexit vote was no more than a 25%. It was a very costly bet.Traders then waded into positions designed to profit from a vote for the status quo, sustaining their theories by referring to the odds, which had long suggested the chance of a Brexit vote was no more than a 25%. It was a very costly bet.
Related: Mark Carney says Brexit contingency plans under wayRelated: Mark Carney says Brexit contingency plans under way
On the dealing room of the financial trading firm IG, clients were calling in a state of near panic. One, who had a profitable position on Barclays shares when the market closed on Wednesday night, was now not only in the red but facing the indignity of being asked to deposit more cash into his account.On the dealing room of the financial trading firm IG, clients were calling in a state of near panic. One, who had a profitable position on Barclays shares when the market closed on Wednesday night, was now not only in the red but facing the indignity of being asked to deposit more cash into his account.
Another told his dealer it was the end of the world.Another told his dealer it was the end of the world.
By 7am Chris Beauchamp, IG’s chief market analyst, was worrying about the effect on markets if the prime minister, David Cameron, did not hold on to his job until the afternoon.By 7am Chris Beauchamp, IG’s chief market analyst, was worrying about the effect on markets if the prime minister, David Cameron, did not hold on to his job until the afternoon.
“Sterling now will depend on the shape of the UK government at about 4pm and if Cameron is still there,” he said. “If he says he’s going it will be sold off again. The best thing he can do is hold the line here. We also have Spanish elections this weekend. To lose one government would be unfortunate. To lose two would be careless.”“Sterling now will depend on the shape of the UK government at about 4pm and if Cameron is still there,” he said. “If he says he’s going it will be sold off again. The best thing he can do is hold the line here. We also have Spanish elections this weekend. To lose one government would be unfortunate. To lose two would be careless.”
Not much more than an hour later Cameron emerged from No 10 and revealed he would not wait until Beauchamp’s teatime deadline. Few on the trading floors bothered to listen to the PM’s speech. They were too busy shouting out trades.Not much more than an hour later Cameron emerged from No 10 and revealed he would not wait until Beauchamp’s teatime deadline. Few on the trading floors bothered to listen to the PM’s speech. They were too busy shouting out trades.
Related: Business leaders react to EU voteRelated: Business leaders react to EU vote
In the Canary Wharf base of the broker Cantor Fitzgerald, as the London stock market opened 7.5% lower overall, the shout rang out that shares in Lloyds Banking Group were down 28%.In the Canary Wharf base of the broker Cantor Fitzgerald, as the London stock market opened 7.5% lower overall, the shout rang out that shares in Lloyds Banking Group were down 28%.
The high street banks began to issue reassuring statements. Jes Staley, the chief executive of Barclays, promised: “We will not break our stride in delivering the Barclays of the future”. Lloyds said: “There are no changes in the products or services offered to customers, either in the UK or overseas.” The high street banks began to issue reassuring statements. Jes Staley, the chief executive of Barclays, promised: “We will not break our stride in delivering the Barclays of the future.” Lloyds said: “There are no changes in the products or services offered to customers, either in the UK or overseas.”
In the first 30 minutes after the market opened as many shares changed hands as in the course of a typical morning. Despite tensions in dealing rooms, however, there was no panic. As one Cantor Fitzgerald trader put it: “Take another blood pressure pill.”In the first 30 minutes after the market opened as many shares changed hands as in the course of a typical morning. Despite tensions in dealing rooms, however, there was no panic. As one Cantor Fitzgerald trader put it: “Take another blood pressure pill.”
Things finally began to quieten down after the Bank of England governor, Mark Carney, soothed nerves with warm words and £250bn of liquidity.Things finally began to quieten down after the Bank of England governor, Mark Carney, soothed nerves with warm words and £250bn of liquidity.
Sterling steadied, albeit below the $1.50 level it had hit at 10pm on Thursday. Shares, which had at one point had fallen more than 8%, closed 3.15% lower – above the level they were a week ago.Sterling steadied, albeit below the $1.50 level it had hit at 10pm on Thursday. Shares, which had at one point had fallen more than 8%, closed 3.15% lower – above the level they were a week ago.
One Cantor Fitzgerald trader observed the market had started to “behave quite well”. Relatively.One Cantor Fitzgerald trader observed the market had started to “behave quite well”. Relatively.