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Property and financial shares slide as referendum fallout hits stock markets Sterling falls to fresh 31-year low as banks and builders slide
(about 3 hours later)
Shares in housebuilders and banks suffered further losses on Monday as the economic and political ramifications of the Brexit vote continued to weigh on markets. The pound has slid to a fresh 31-year low and shares in housebuilders and banks have sustained more heavy losses as the economic and political ramifications of the Brexit vote continued to weigh on markets.
The pound remained under pressure on the foreign exchange markets, although it regained some ground after an early morning announcement from George Osborne, who said he would not resign and insisted the country was “ready to confront what the future holds for us from a position of strength”. The pound remained under pressure on the foreign exchange markets on Monday, despite attempts by George Osborne to soothe the markets by insisting Britain was “ready to confront what the future holds for us from a position of strength”.
The chancellor spoke after turmoil on global markets on Friday wiped $2tn from share prices, the largest ever one day fall, surpassing even the darkest days of the 2008 banking crisis. After initially gaining some ground, sterling fell more than 3% against the dollar to $1.3192, its lowest level since 1985. Against the euro it was down to €1.1983, its lowest since March 2014.
Osborne’s words also gave investors confidence to buy gilts, UK government bonds. The yields on gilts, which move inversely to prices, fell below 1% for the first time, amid expectations that the Bank of England will cut interest rates from their current low of 0.5% to zero. The chancellor spoke after turmoil on global markets on Friday wiped $2tn from share prices, the largest ever one-day fall, surpassing even the darkest days of the 2008 banking crisis.
Bank of England governor Mark Carney has abandoned plans to fly to Portugal later in the week for a meeting with central bank governors and policymakers and will remain in the UK to oversee the response to the crisis. Osborne’s words gave investors some confidence to buy gilts, UK government bonds. The yields on gilts, which move inversely to prices, fell below 1% for the first time, amid expectations that the Bank of England will cut interest rates from their current low of 0.5% to zero.
The FTSE 100 was down 61 points at 6,076, or 1%, but the fall was not as large as had been feared. Before Osborne spoke, the index of leading shares had been called 180 points lower. The Bank of England’s Mark Carney abandoned plans to fly to Portugal later in the week for a meeting with fellow central bank governors and policymakers. He will remain in the UK to oversee the response to the crisis.
Even so, there were some hefty fallers: easyJet suffered one of the biggest losses as the budget airline warned profits would be lower than expected because of the impact on consumer confidence. Its shares slumped 16% to a three-year low of £10.99. The FTSE 100 was down more than 100 points at 6,037, or 1.7%, but the fall was not as large as had been feared. Before Osborne spoke, the index of leading shares was being called 180 points lower.
Shares in banks were down again, with Barclays falling by 5%. Analysts at Bernstein said: “The UK referendum is a game changer for Barclays. The group’s portfolio of businesses, notably the investment banking operations, are overly prone to downside risk on earnings and capital”. Even so, there were some hefty fallers: easyJet had one of the biggest losses as the short-haul airline warned profits would be lower than expected because of the impact on consumer confidence. Its shares slumped 18% to a three-year low of £10.72.
Bailed-out Royal Bank of Scotland and Lloyds Banking Group were also among the top 10 fallers, as the market reckoned that the government’s attempt to sell off its remaining stakes has now stalled. Housebuilders and companies reliant on providing supplies to the housing market were also down. Shares in banks fell sharply, adding to the losses on Friday. Barclays slumped by 11%. Bailed-out Royal Bank of Scotland and Lloyds Banking Group were also among the top 10 fallers, as the market reckoned the government’s attempt to sell off its remaining stakes has now stalled. RBS slumped 15% to 175p, its lowest level in five years. Lloyds was down 9% at 51p.
Outside the FTSE 100, shares in estate agents Foxtons were down 17% at after it spelt out the impact of Brexit on the high end of the property market, driving its shares to half the value at which they were floated at three years ago. Housebuilders and companies reliant on providing supplies to the housing market were also down.
The FTSE 250 index, which comprises companies more closely linked to the UK economy, was down 2%. Challenger bank Virgin Money was off 9%, as was headhunters Hays. Engineering firm Balfour Beatty, online supermarket group Ocado and building group Redrow were also lower. Outside the FTSE 100, shares in estate agents Foxtons were down 22% after it spelt out the impact of Brexit on the high end of the property market.
Analysts said the Chancellor’s intervention had helped to calm some nerves. “It seems that George Osborne’s appearance this morning, his first since before the referendum results were announced, has somewhat calmed investors’ fears, the Chancellor joining many of his Tory colleagues in claiming there is no rush to trigger the dreaded Article 50 despite increasing pressure from Europe,” said Connor Campbell, analyst at spread-betting firm SpreadEx. Article 50 is the formal process by which the UK withdraws from the EU. The FTSE 250 index, which comprises companies more closely linked to the UK economy, was down 2%. Virgin Money was off 21%, while other challenger banks were also sharply lower such the newly floated Clydesdale bank. Headhunters Hays, engineering compnay Balfour Beatty, online supermarket group Ocado and building group Redrow were also lower.
The delay to invoking article 50 was welcomed by employers’ body the CBI. “Never has there been a more important time to put the interests of the country ahead of party politics,” said Carolyn Fairbairn, CBI director general. Analysts said the chancellor’s intervention had helped to calm some nerves, at least initially.
“It seems that George Osborne’s appearance this morning, his first since before the referendum results were announced, has somewhat calmed investors’ fears, the chancellor joining many of his Tory colleagues in claiming there is no rush to trigger the dreaded article 50 despite increasing pressure from Europe,” said Connor Campbell, analyst at spread-betting firm SpreadEx. Article 50 is the formal process by which the UK withdraws from the EU.
The delay to invoking article 50 was welcomed by employers’ body the CBI. “Never has there been a more important time to put the interests of the country ahead of party politics,” said Carolyn Fairbairn, its director general.
She called for the government “to preserve the openness of the UK’s economy” by protecting “tariff and barrier-free access to the single market”.She called for the government “to preserve the openness of the UK’s economy” by protecting “tariff and barrier-free access to the single market”.
“There is one other action that needs to be taken immediately. The government should remove uncertainties over the long term right to stay in the UK for those already working here as soon as possible,” said Fairbairn. She said: “There is one other action that needs to be taken immediately. The government should remove uncertainties over the long term right to stay in the UK for those already working here as soon as possible.”
Much of the focus has been on the value of the pound, which had plunged to 31-year lows as the referendum result came in during Thursday night. Legendary speculator George Soros, who made $1bn when sterling fell out of the exchange rate mechanism in 1992, had warned of a “Black Friday” in the event of Brexit. His spokesman stressed that he not bet against the pound last week.Much of the focus has been on the value of the pound, which had plunged to 31-year lows as the referendum result came in during Thursday night. Legendary speculator George Soros, who made $1bn when sterling fell out of the exchange rate mechanism in 1992, had warned of a “Black Friday” in the event of Brexit. His spokesman stressed that he not bet against the pound last week.
“George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union,” a spokesman for Soros said according to Reuters. “George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union,” the spokesman was quoted by Reuters as saying.
“However, because of his generally bearish outlook on world markets, Mr Soros did profit from other investments,” the spokesman said. “However, because of his generally bearish outlook on world markets, Mr Soros did profit from other investments.”