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| Pound hits new 31-year low, as Brexit fears grip markets – business live | Pound hits new 31-year low, as Brexit fears grip markets – business live |
| (about 1 hour later) | |
| 5.54pm BST | |
| 17:54 | |
| European markets end sharply lower again | |
| The effect of calming words from UK chancellor George Osborne early on Monday morning did not last very long, with investors bailing out of shares once again in the wake of the shock vote for the UK to leave the European Union, and the subsequent political chaos at the top of the country’s two main parties. | |
| The FTSE 100 has now lost nearly £100bn in the two trading days since the result of the vote, falling another 2.55% on Monday, while the more domestically focused FTSE 250 slumped nearly 7% during the day and hit its lowest level since 2014. The 250 is down 14% in two trading days. | |
| The pound has also been pummelled, falling to new 31 year lows against the dollar and dropping more than 2.4% against the euro. | |
| Airline shares fell after a warning from easyJet, banks were sliding across Europe on worries about the effect on their balance sheets of the possible economic fallout from Brexit, with the European banking index down 7.6%, while UK housebuilders were also undermined by the vote. | |
| But with investors seeking havens, gold and silver were in demand, with precious metal miners Randgold Resources and Fresnillo leading the risers in the FTSE 100. Dollar earning UK-listed companies such as AstraZeneca and Diageo also bucked the falling trend. | |
| The yield on UK ten year gilts fell below 1% for the first time, another sign of investors seeking secure homes for their cash. | |
| Joshua Mahony, market analyst at IG, said: | |
| The pound and UK stocks have taken a hammering for a second consecutive trading day today, as investor sentiment continues to wane on the largely unknown consequences of Friday’s Brexit result. As the pound continues to suffer, investors are fast seeking havens, yet with the Swiss (who intervened on Friday) and Japanese (who likely will in July) central banks likely to devalue, the US dollar index has surged to a three month high. | |
| What we really need is some form of decisive action, as financial markets seek reassurance that things will be OK. What we look likely to get is two months of political infighting, followed by another 20 months of uncertainty as the new leader somehow attempts to secure a deal which appeals to the many facets of the leave campaign. This will all take time and in the meanwhile, investors and businesses are left to ponder what the potential impact will be of this monumental decision. | |
| The final scores showed: | |
| On Wall Street the Dow Jones Industrial Average is currently down 273 points or 1.58%. | |
| Updated | |
| at 6.04pm BST | |
| 5.36pm BST | |
| 17:36 | |
| Dominic Rushe | |
| Ryan Sweet, director of real-time economics at Moody’s Analytics, has been talking about the effect of Brexit on the US economy, writes Dominic Rushe: | |
| “The UK’s exit has created a significant amount of uncertainty and has unsettled financial markets. The three major channels are financial markets, confidence and trade. Financial markets pose the most significant and immediate threat to the US economy. US equities are likely going to have a rough few days.” | |
| Moody’s expects the Brexit news to shave 0.1 of a percentage point off US GDP growth over the course of the next year but it shouldn’t have an appreciable impact on jobs or the unemployment rate. | |
| Over the long-term Sweet said a Brexit shouldn’t be significant drag on the US economy. | |
| 5.34pm BST | |
| 17:34 | |
| We knew Friday was a turbulent day in the markets, and here’s some data from Hargreaves Lansdown to back it up. | |
| The investment group said visits to its website on Friday surged to 636,061, up 50% on the previous highest daily record. | |
| It said investors spent the equivalent of 17 and a half year’s normal activity on its website in one day. And the majority of the deal were buys (possibly not looking so good today but hey, long term). | |
| 4.45pm BST | 4.45pm BST |
| 16:45 | 16:45 |
| The FTSE 100 has finished 156.49 points or 2.55% lower at 5982.20. However this is only the lowest level since 16 June, given the market bounce ahead of the referendum when everyone believed the Remain camp would win the day. | The FTSE 100 has finished 156.49 points or 2.55% lower at 5982.20. However this is only the lowest level since 16 June, given the market bounce ahead of the referendum when everyone believed the Remain camp would win the day. |
| 4.43pm BST | 4.43pm BST |
| 16:43 | 16:43 |
| Here’s a useful little guide to some possible Brexit effects, courtesy of Open Europe: | Here’s a useful little guide to some possible Brexit effects, courtesy of Open Europe: |
| From our #Brexit report. How will leaving affect different sectors of the UK economy ?services most tricky. pic.twitter.com/2M1DTSB3nY | From our #Brexit report. How will leaving affect different sectors of the UK economy ?services most tricky. pic.twitter.com/2M1DTSB3nY |
| 4.35pm BST | 4.35pm BST |
| 16:35 | 16:35 |
| Another stab at where markets and sterling may go from here, from Morgan Stanley. | Another stab at where markets and sterling may go from here, from Morgan Stanley. |
| In a weekend note (ie before today’s falls) it said: | In a weekend note (ie before today’s falls) it said: |
| Our foreign exchange strategists believe that the pound will ultimately fall to ¢1.25-1.30. Our equity strategists believe that European and UK stocks may need to correct a further 7-10% over the next several months. While these adjustments may seem harsh in light of Friday’s moves, we think they’re consistent with the uncertainty this vote has created. ¢1.25-1.30 for the pound would only begin to make the currency look cheap on a trade-weighted basis. A further 7-10% fall in UK and European stocks would simply bring forward multiples down to the long-run average. Both seem reasonable in light of increased uncertainty. | Our foreign exchange strategists believe that the pound will ultimately fall to ¢1.25-1.30. Our equity strategists believe that European and UK stocks may need to correct a further 7-10% over the next several months. While these adjustments may seem harsh in light of Friday’s moves, we think they’re consistent with the uncertainty this vote has created. ¢1.25-1.30 for the pound would only begin to make the currency look cheap on a trade-weighted basis. A further 7-10% fall in UK and European stocks would simply bring forward multiples down to the long-run average. Both seem reasonable in light of increased uncertainty. |
| 4.08pm BST | 4.08pm BST |
| 16:08 | 16:08 |
| The FTSE 250 may be slumping faster than the top 100 index, but this is not the full picture. Michael Hewson, chief market analyst at CMC Markets UK, says: | The FTSE 250 may be slumping faster than the top 100 index, but this is not the full picture. Michael Hewson, chief market analyst at CMC Markets UK, says: |
| The FTSE250 has borne the brunt of the sell-off in the UK market, dropping below its February lows, due to its heavier exposure to the UK economy, having fallen over 2,000 points in the last two days. | The FTSE250 has borne the brunt of the sell-off in the UK market, dropping below its February lows, due to its heavier exposure to the UK economy, having fallen over 2,000 points in the last two days. |
| In order to give some perspective though over a five year time frame the picture does look somewhat different, with the FTSE100 only up 6% in that period, while the FTSE250 is still up over 30%, well above levels seen in back in 2011 when it was trading around the 10,500 level. | In order to give some perspective though over a five year time frame the picture does look somewhat different, with the FTSE100 only up 6% in that period, while the FTSE250 is still up over 30%, well above levels seen in back in 2011 when it was trading around the 10,500 level. |
| Elsewhere the banks are under pressure, and not just in the UK where Royal Bank of Scotland is currently down 15% and Barclays 17% lower. Hewson again: | Elsewhere the banks are under pressure, and not just in the UK where Royal Bank of Scotland is currently down 15% and Barclays 17% lower. Hewson again: |
| Deutsche Bank has once again hit new record lows while Italian banks have also remained under pressure, with Unicredit, Monti Dei Paschi and Popolare all down heavily at new all-time lows, as concerns about the huge amount of non-performing loans prompt new concerns about their solvency. | Deutsche Bank has once again hit new record lows while Italian banks have also remained under pressure, with Unicredit, Monti Dei Paschi and Popolare all down heavily at new all-time lows, as concerns about the huge amount of non-performing loans prompt new concerns about their solvency. |
| Reports that the Italian government is weighing up measures that could add up to €40bn into Italian lenders haven’t been enough to support the share prices, probably down to the fact that these banks have non-performing loans in excess of €300bn. | Reports that the Italian government is weighing up measures that could add up to €40bn into Italian lenders haven’t been enough to support the share prices, probably down to the fact that these banks have non-performing loans in excess of €300bn. |
| Spanish banks have also slid back despite initially opening higher after the weekend election saw Mariano Rajoy once again fall short of an overall majority, though his party did increase the number of seats from the vote in December. | Spanish banks have also slid back despite initially opening higher after the weekend election saw Mariano Rajoy once again fall short of an overall majority, though his party did increase the number of seats from the vote in December. |
| 3.46pm BST | 3.46pm BST |
| 15:46 | 15:46 |
| "Markets are volatile, companies are considering their investments, we know this will be far from plain sailing." @David_Cameron #Brexit | "Markets are volatile, companies are considering their investments, we know this will be far from plain sailing." @David_Cameron #Brexit |
| 3.38pm BST | 3.38pm BST |
| 15:38 | 15:38 |
| Cameron says the clear vote for Brexit must be respected. | Cameron says the clear vote for Brexit must be respected. |
| The Bank of England and Treasury will not hesitate to take further measures to stabilise financial markets if required, he says. | The Bank of England and Treasury will not hesitate to take further measures to stabilise financial markets if required, he says. |
| 3.36pm BST | 3.36pm BST |
| 15:36 | 15:36 |
| David Cameron, who announced his decision to quit as UK prime minister in the wake of the referendum vote, is making a statement in the Commons on the vote. | David Cameron, who announced his decision to quit as UK prime minister in the wake of the referendum vote, is making a statement in the Commons on the vote. |
| Follow it in our politics live blog from here. | Follow it in our politics live blog from here. |
| 3.33pm BST | 3.33pm BST |
| 15:33 | 15:33 |
| Over in the US, the latest service sector survey has come in weaker than expected. | Over in the US, the latest service sector survey has come in weaker than expected. |
| The provisional Markit service sector PMI for June was steady at 51.3 compared to May, but lower than the 52 level expected by analysts. | The provisional Markit service sector PMI for June was steady at 51.3 compared to May, but lower than the 52 level expected by analysts. |
| Nothing to like in Markit's Flash Services PMI. pic.twitter.com/oxmtyBE46Q | Nothing to like in Markit's Flash Services PMI. pic.twitter.com/oxmtyBE46Q |
| 3.31pm BST | 3.31pm BST |
| 15:31 | 15:31 |
| And here’s the difference between the FTSE 100’s losses and its losses in dollar terms: | And here’s the difference between the FTSE 100’s losses and its losses in dollar terms: |
| $FTSE 100 index loses "only" 6% since pre-#Brexit high - in $USD terms, make that -16% #forex pic.twitter.com/eqZUO7ZPtK | $FTSE 100 index loses "only" 6% since pre-#Brexit high - in $USD terms, make that -16% #forex pic.twitter.com/eqZUO7ZPtK |
| 3.26pm BST | 3.26pm BST |
| 15:26 | 15:26 |
| Despite the turbulence in the markets since the referendum result, the City fears there could be more to come until the current situation is resolved. | Despite the turbulence in the markets since the referendum result, the City fears there could be more to come until the current situation is resolved. |
| Russell Clifton, managing director of sales trading at broker Panmure Gordon said: “There is a perfect storm of uncertainty. Speaking to dealing desks, most of them are skewed to the sell side.” | Russell Clifton, managing director of sales trading at broker Panmure Gordon said: “There is a perfect storm of uncertainty. Speaking to dealing desks, most of them are skewed to the sell side.” |
| Not only is there the Brexit fallout, leaving the UK’s two major parties in the midst of a leadership crisis, there is also the US election looming later in the year and the advent of summer, when trading volumes are thinner and market movements potentially more volatile as a result. | Not only is there the Brexit fallout, leaving the UK’s two major parties in the midst of a leadership crisis, there is also the US election looming later in the year and the advent of summer, when trading volumes are thinner and market movements potentially more volatile as a result. |
| Clifton also pointed out that since the financial crisis, banks propriety desks - big players in the market - have been far more cautious, with the result that buyers are fewer and liquidity in the market is less than it was. | Clifton also pointed out that since the financial crisis, banks propriety desks - big players in the market - have been far more cautious, with the result that buyers are fewer and liquidity in the market is less than it was. |
| So far the FTSE 100 - down 2.3% at the moment after Wall Street’s opening fall - is outperforming the mid-cap FTSE 250 which has dropped 6.6%. The leading index is receiving some support from dollar earners and the fact it is a more global based index, whereas the FTSE 250 is predominantly domestic UK companies. | So far the FTSE 100 - down 2.3% at the moment after Wall Street’s opening fall - is outperforming the mid-cap FTSE 250 which has dropped 6.6%. The leading index is receiving some support from dollar earners and the fact it is a more global based index, whereas the FTSE 250 is predominantly domestic UK companies. |
| Meanwhile Panmure Gordon chief economist Simon French suggested: “If you want a clue where the market may go, in 2008 [financial crisis] there were six or seven days with more than 7% movements in dollar terms.” | Meanwhile Panmure Gordon chief economist Simon French suggested: “If you want a clue where the market may go, in 2008 [financial crisis] there were six or seven days with more than 7% movements in dollar terms.” |
| Alternatively sterling, which has been pummelled along with stock markets, could benefit from recovering its position as a currency haven. Despite talk of UK interest rate cuts adding to the pound’s slide, French does not believe Mark Carney will cut borrowing costs further: “I don’t see the advantage in a rate cut since it will put more downward pressure on the pound.” | Alternatively sterling, which has been pummelled along with stock markets, could benefit from recovering its position as a currency haven. Despite talk of UK interest rate cuts adding to the pound’s slide, French does not believe Mark Carney will cut borrowing costs further: “I don’t see the advantage in a rate cut since it will put more downward pressure on the pound.” |
| Updated | Updated |
| at 3.26pm BST | at 3.26pm BST |
| 2.58pm BST | 2.58pm BST |
| 14:58 | 14:58 |
| Another Brexit profit warning, this time from recruitment group InterQuest. It said: | Another Brexit profit warning, this time from recruitment group InterQuest. It said: |
| In light of the uncertainty in the run up to the EU referendum, the company has experienced variable trading with clients delaying hiring decisions. The result of the referendum is now expected to prolong this period of uncertainty and, whilst it is too early to predict the longer term impact, the company expects trading conditions in the wider recruitment sector to remain challenging for at least the remainder of the current financial year. | In light of the uncertainty in the run up to the EU referendum, the company has experienced variable trading with clients delaying hiring decisions. The result of the referendum is now expected to prolong this period of uncertainty and, whilst it is too early to predict the longer term impact, the company expects trading conditions in the wider recruitment sector to remain challenging for at least the remainder of the current financial year. |
| The company is somewhat protected from wider recruitment trends due to its focus on hard to find niche candidates in rapidly growing sectors in the new digital economy, but as a result of the wider market conditions, the company now expects that group net fee income and EBIT for the current financial year will be materially below market expectations. | The company is somewhat protected from wider recruitment trends due to its focus on hard to find niche candidates in rapidly growing sectors in the new digital economy, but as a result of the wider market conditions, the company now expects that group net fee income and EBIT for the current financial year will be materially below market expectations. |
| Its shares have slumped 28% to 78p. | Its shares have slumped 28% to 78p. |
| 2.54pm BST | 2.54pm BST |
| 14:54 | 14:54 |
| Lunchtime summary: Manic Monday in the markets | Lunchtime summary: Manic Monday in the markets |
| Time for a quick recap. | Time for a quick recap. |
| Europe’s financial markets are being buffeted by fresh fears following Britain’s decision to vote to leave the EU last Thursday. | Europe’s financial markets are being buffeted by fresh fears following Britain’s decision to vote to leave the EU last Thursday. |
| The pound has been driven down to a new 31-year low, hitting $1.3152 against the US dollar for the first time since 1985. | The pound has been driven down to a new 31-year low, hitting $1.3152 against the US dollar for the first time since 1985. |
| The selloff was relentless, despite finance minister George Osborne telling the media at 7am London time that the UK economy could ride out the current storm. | The selloff was relentless, despite finance minister George Osborne telling the media at 7am London time that the UK economy could ride out the current storm. |
| The £ against the $ since Osborne made his statement at 7am... #Brexit pic.twitter.com/5aP4RUIB0x | The £ against the $ since Osborne made his statement at 7am... #Brexit pic.twitter.com/5aP4RUIB0x |
| The London stock market has also been driven down by worries about the UK economy, and the relentless political infighting at Westminster. | The London stock market has also been driven down by worries about the UK economy, and the relentless political infighting at Westminster. |
| The FTSE 100 is currently down 119 points at 6019, which means it has lost over £80bn since the start of trading on Friday. | The FTSE 100 is currently down 119 points at 6019, which means it has lost over £80bn since the start of trading on Friday. |
| The FTSE 250 index, which contains smaller companies, has shed 6% as investors raced to ditch stocks again. | The FTSE 250 index, which contains smaller companies, has shed 6% as investors raced to ditch stocks again. |
| Bank shares are being hit very hard, with one fund manager saying there is ‘capitulation’ in the financial sector. | Bank shares are being hit very hard, with one fund manager saying there is ‘capitulation’ in the financial sector. |
| Royal Bank of Scotland fell 25% at one stage, meaning taxpayers had lost £8m on their stake. | Royal Bank of Scotland fell 25% at one stage, meaning taxpayers had lost £8m on their stake. |
| Barclays is down 15%. Some smaller banks, such as Virgin Money, have lost a quarter of their value today. | Barclays is down 15%. Some smaller banks, such as Virgin Money, have lost a quarter of their value today. |
| RBS shares down a third since refo. Call it a £8bn loss on our 73% stake. Don't worry, tho', Johnson says markets stable. | RBS shares down a third since refo. Call it a £8bn loss on our 73% stake. Don't worry, tho', Johnson says markets stable. |
| Housebuilders and estate agents have been hit hard, too, after Foxtons issued a profit warning. Some building firms have lost 40% of their value since the referendum. | Housebuilders and estate agents have been hit hard, too, after Foxtons issued a profit warning. Some building firms have lost 40% of their value since the referendum. |
| While shares slumped, the prices of safe-haven government debt have hit record highs. That has driven down the interest rate on UK 10-year gilts to below 1% for the first time ever. | While shares slumped, the prices of safe-haven government debt have hit record highs. That has driven down the interest rate on UK 10-year gilts to below 1% for the first time ever. |
| City economists are gloomy today, with some forecasting a UK recession due to the uncertainty caused by the Brexit vote. | City economists are gloomy today, with some forecasting a UK recession due to the uncertainty caused by the Brexit vote. |
| Policymakers are scrambling to react to the unfolding drama in the markets. Bank of England governor Mark Carney has pulled out of a conference in Portugal, a move swiftly copied by US central bank chief Janet Yellen. | Policymakers are scrambling to react to the unfolding drama in the markets. Bank of England governor Mark Carney has pulled out of a conference in Portugal, a move swiftly copied by US central bank chief Janet Yellen. |
| Carney’s predecessor, Lord Mervyn King, has heavily criticised the UK government for its tactics during the referendum. | Carney’s predecessor, Lord Mervyn King, has heavily criticised the UK government for its tactics during the referendum. |
| He told the BBC that: | He told the BBC that: |
| “If you say to someone ‘you’re an idiot if you don’t agree with me’ you’re not likely to bring them in your direction, | “If you say to someone ‘you’re an idiot if you don’t agree with me’ you’re not likely to bring them in your direction, |
| Chancellor George Osborne has ditched one of his pre-referendum threats, to hold an emergency punishment budget. | Chancellor George Osborne has ditched one of his pre-referendum threats, to hold an emergency punishment budget. |
| Related: George Osborne seeks to calm markets amid Brexit turmoil | Related: George Osborne seeks to calm markets amid Brexit turmoil |
| Osborne tried to sound reassuring this morning, saying: | Osborne tried to sound reassuring this morning, saying: |
| I said we had to fix the roof so that we were prepared for whatever the future held. Thank goodness we did. As a result, our economy is about as strong as it could be to confront the challenge our country now faces.” | I said we had to fix the roof so that we were prepared for whatever the future held. Thank goodness we did. As a result, our economy is about as strong as it could be to confront the challenge our country now faces.” |
| However, the markets don’t seem terribly calm today.... | However, the markets don’t seem terribly calm today.... |
| Chancellor Osborne reassures markets. #Brexit #CatsForBrexit pic.twitter.com/JxwIuGYBZF | Chancellor Osborne reassures markets. #Brexit #CatsForBrexit pic.twitter.com/JxwIuGYBZF |
| 2.40pm BST | 2.40pm BST |
| 14:40 | 14:40 |
| The Dow is still falling.... | The Dow is still falling.... |
| ALERT: Dow falls more than 200 points https://t.co/TkYc8XrWYG pic.twitter.com/oqutdCIwsR | ALERT: Dow falls more than 200 points https://t.co/TkYc8XrWYG pic.twitter.com/oqutdCIwsR |
| 2.33pm BST | 2.33pm BST |
| 14:33 | 14:33 |
| Over in New York, the US stock market is falling at the start of trading. | Over in New York, the US stock market is falling at the start of trading. |
| The Dow Jones index dropped by 148 points, or 0.85%, at the open, with Brexit still on everyone’s mind. | The Dow Jones index dropped by 148 points, or 0.85%, at the open, with Brexit still on everyone’s mind. |
| That follows big losses on Friday, when the Dow shed almost 600 points: | That follows big losses on Friday, when the Dow shed almost 600 points: |
| 2.23pm BST | 2.23pm BST |
| 14:23 | 14:23 |
| Readers may have spent the weekend glued to the political crisis in Westminster, watching Euro 2016, or braving bouts of bad weather (we had hailstones in Oxford) to go shopping or tend the garden. | Readers may have spent the weekend glued to the political crisis in Westminster, watching Euro 2016, or braving bouts of bad weather (we had hailstones in Oxford) to go shopping or tend the garden. |
| But City economists didn’t have time for fun. They were locked away, slashing their UK growth forecasts, following the Brexit vote. | But City economists didn’t have time for fun. They were locked away, slashing their UK growth forecasts, following the Brexit vote. |
| Emily Cadman of the FT has helpfully rounded up the details: | Emily Cadman of the FT has helpfully rounded up the details: |
| Phillip Shaw, chief UK economist at Investec, said he believed the economy would enter “a period of near stagnation”, adding that a recession was a “realistic possibility”. | Phillip Shaw, chief UK economist at Investec, said he believed the economy would enter “a period of near stagnation”, adding that a recession was a “realistic possibility”. |
| Citi, which has yet to formally change its forecasts, warned that downgrades were “likely”. | Citi, which has yet to formally change its forecasts, warned that downgrades were “likely”. |
| Goldman Sachs is now expecting annual growth of just 0.2 per cent in 2017, down from 2 per cent before the referendum. | Goldman Sachs is now expecting annual growth of just 0.2 per cent in 2017, down from 2 per cent before the referendum. |
| George Buckley, chief UK economist at Deutsche Bank, said he expected Brexit to “focus minds” on the BoE’s interest rate setting committee on the long-term impact of slower growth — and a possible recession — rather than a short-term rise in inflation. | George Buckley, chief UK economist at Deutsche Bank, said he expected Brexit to “focus minds” on the BoE’s interest rate setting committee on the long-term impact of slower growth — and a possible recession — rather than a short-term rise in inflation. |
| More here: | More here: |
| City economists slash UK growth forecasts | City economists slash UK growth forecasts |