Brexit: £50bn wiped off shares with markets in turmoil

Traders fromm ETX Capital work in central london on June 24, 2015 following the announcement of the EU referendum.
 Picture: Getty Images/AFP

Traders fromm ETX Capital work in central london on June 24, 2015 following the announcement of the EU referendum. Picture: Getty Images/AFP

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More than £50 billion has been wiped off the value of the UK’s biggest companies after Britain voted to leave the European Union.

The FTSE 100 Index closed down 3.15 per cent, falling 199.41 points to 6138.69, as it recovered from a seven per cent plunge earlier in the session when David Cameron announced he would quit as Prime Minister by October following the Brexit vote.

Sterling began to creep back from its ten per cent fall and 31-year low in the early hours of yesterday morning, as it dropped 8.9 per cent against the dollar at 1.365 US dollars.

London’s top-flight index had lost more than £100 billion earlier in the session, while world markets descended into chaos as uncertainty spread across the globe.

But the London market regained some poise – finishing higher at the end of the week than at the start – after the Bank of England pledged to intervene to help shore up the markets.

Governor Mark Carney said the Bank was prepared to provide £250 billion to support the markets, but added that “some market and economic volatility can be expected as this process unfolds”.

But the FTSE 250 remained heavily down, sliding seven per cent or 245.5 points to 16,088.1. Across Europe, Germany’s Dax was 6.8 per cent off and the Cac 40 in France was down 7.9 per cent as both markets pulled back from nine per cent falls in earlier trading.

The US Dow Jones Industrial Average opened 2.8 per cent lower, before paring back to a drop of 2.5 per cent as the FTSE 100 closed.

The US central bank has said it is ready to take steps to ease the pressure on global markets following Britain’s decision to leave the EU.

The Federal Reserve said it was “carefully monitoring developments” and would pump extra money into global financial markets to soften the blow on the US economy if needed.

The price of oil also took a tumble, dropping 4.1 per cent or $2.11 dollars to $48.80 (£35.70) a barrel in the wake of the Brexit decision.

The London market resembled a sea of red, with heavy-weight financial stocks and travel firms falling sharply.

But it was the housebuilders which bore the brunt of the slump, with Taylor Wimpey standing at the top of the biggest fallers, off more than 29 per cent or 56.3p at 136.1p.

Charles Church-owner Persimmon was down 27 per cent or 578p to 1520p, while Barratt Developments slid just shy of 24 per cent or 137.7p to 439.8p. Liberum analyst Charlie Campbell said: “The debate over what the EU referendum means for the outlook for the UK will last much longer than today, but for now we offer the conclusion that the outcome is bad for housebuilders’ shares as the combination of slowing GDP, rising longer term rates and political uncertainty is like Kryptonite for that group of shares.”

Lloyds Banking Group took a hefty hit, down 21 per cent or 15.2p to 57p, while Barclays dropped 17 per cent or 33.1p to 153.9p.

Among the travel firms under pressure, British Airways-owner IAG was more than 22 per cent down, falling 119p to 409p as it warned over profits following Brexit.

The airline firm said “it no longer expects to generate an absolute operating profit increase similar to 2015” following the outcome of the referendum.

Meanwhile, budget carrier easyJet announced it was “working on a number of options to allow it to continue flying in all of its markets”.

Shares were off 14 per cent or 220p at 1313p.

In retail stocks, Marks & Spencer fell close to 11 per cent or 39.9p at 326.4p, while Next slid 12 per cent or 687p to 4848p.

But safe haven stocks were soaring as gold rallied to a two-year high at $1358, before paring back to $1318.4.

Gold miner Rangold Resources was the biggest riser, up more than 14 per cent or 915p to 7370p, while silver miner Fresnillo climbed around 11 per cent or 147p to 1386p, as investors ran for cover following the market fall.

Rolls-Royce shares were also fairing better than the wider market, as it stated that two-thirds of its revenue and three-quarters of its order book came from outside of the EU.

The company said “the UK’s decision will have no immediate impact on our day-to-day business”, helping shares to climb 4.5p to 649p.

The biggest risers on the FTSE 100 Index were Rangold Resources up 915p to 7370p, Fresnillo up 147p to 1386p, Arm Holdings up 61p to 1080p, and Compass Group up 51p to 1350p.

The biggest fallers were Taylor Wimpey down 56.3p to 136.1p, Persimmon down 578p to 1520p, Barratt Developments down 137.7p to 439.8p, and IAG down 119p to 409p.

Meanwhile, experts predict that although house prices and sales volume will be hit in the short term as buyers and sellers sit it out while the dust settles, the underlying shortage of property in the UK will see the market recover. Jan Crosby, head of housing at KPMG, said the immediate impact on prices depends to a large extent on the reaction of the housebuilders.

He said: “It is likely there will be a price drop in the order of five per cent in regional UK, possibly slightly more in London, but we are most likely to see a drop in the growth in asking prices rather than 
pricing, which will likely change less.”

Nina Skero, senior economist at Centre for Economics and Business Research said that in the short term the outcome will “almost certainly have a negative impact on both prices and transaction numbers” although is still predicting a UK-wide rise of 4.5 per cent this year.

Scottish Property Federation director David Melhuish, said his members were looking for the UK and Scottish governments to provide reassurance for investors and the markets.

“The priority in Scotland must remain on growing the economy and delivering the infrastructure our businesses and communities need.”

newsen@edinburghnews.com