UK markets shudder after Brexit vote, sterling
hits 31-year low
Sterling plunged to its lowest in three decades and the
value of London's big banks sank by the most since the 2008 financial crisis on
Friday as Britain's shock vote to leave the European Union sparked turmoil on
global financial markets.
The Bank of England's promise to provide 250 billion
pounds of support and extra supplies of foreign currency if needed steadied the
ship somewhat, halving initial losses for the FTSE 100 and the
pound.
But sterling was still down more than 6 percent against
the dollar by mid-morning in London, its biggest fall since the system of
free-floating exchange rates was introduced in the early 1970s.
That reflected widespread alarm in the financial community
over the uncertainty and volatility likely to be unleashed by the Brexit vote.
London bankers who had worked through the night said it was the most volatile
day's trading they had ever seen.
Gold pulls back from 2-year highs, remains supported
Gold prices pulled back from two-year highs but remained
supported on Friday, as the U.K.’s surprise decision to leave the European
Union in a landmark referendum continued to boost safe-haven demand.
The precious metal rallied to 27-month highs earlier,
after the U.K.
voted by a substantial margin to leave the EU in a landmark referendum, with the
Leave side winning 52% of the vote, against 48% to remain.
Gold prices had weakened earlier in
the week as markets broadly expected Britain to vote against a Brexit, fuelling
demand for riskier assets.
The Bank of England said Friday it
would take all necessary steps to secure monetary and financial stability after
the shock Brexit result.
"The Bank of England is
monitoring developments closely," it said in a statement.
"It has undertaken extensive contingency
planning and is working closely with HM Treasury, other domestic authorities
and overseas central banks."
The
news pushed the pound down to its lowest level since 1985
against the U.S. dollar overnight.
Elsewhere
in metals trading, silver futures for July delivery jumped 2.46% to
$17.775 a troy ounce, while copper futures for July delivery plummeted 3.31% to
$2.091 a pound.
Oil sinks 4% as Brexit claims victory and dollar moves higher
Oil
sunk nearly 4% in European trade on Friday, erasing overnight gains, after the
official results from U.K. vote on membership in the European Union
(EU) gave the victory to
Brexit, as the decision to leave is known, and the
dollar moved higher.
The U.K.
voted by a substantial margin to exit the EU, with the Leave side winning 52%
of the vote, against 48% to remain.
A
stronger dollar also put downward pressure on black gold, as crude becomes more
expensive for buyers using other currencies. The U.S. dollar index, which
measures the greenback’s strength against a trade-weighted basket of six major
currencies, jumped 1.97% to 95.17 after hitting overnight highs of 96.70.
On
Thursday, London-traded Brent futures closed up $1.06, or 2.11%, to settle at
$50.94, near session highs of $50.95, in the final hours of the Brexit vote.
Elsewhere, crude
oil for August delivery on the New York Mercantile Exchange $2.00, or
3.99%, to trade at $48.11 a barrel.
Despite
Friday’s losses, U.S. crude futures are up nearly 85% since falling to 13-year
lows at $26.05 on February 11 as a decline in U.S. shale production boosted
sentiment. However, with prices now at levels that make drilling economical for
some firms, the rig count might start rising soon and the decline in U.S.
production may slow.
In
that light, energy traders looked ahead to Friday's rig count report from
Baker Hughes for further indications on whether U.S. shale producers are
continuing to return online, as oil prices stabilize. A week earlier, the U.S.
oil rig count rose by nine to 337 for the week ending on June 10, representing
their third straight weekly increase.
The
renewed gain in U.S. drilling activity fueled speculation that domestic
production could be on the verge of rebounding in the weeks ahead, underlining
worries over a supply glut.
Meanwhile,
Brent's premium to the WTI crude contract stood at 74 cents a barrel, compared
to a gap of 81 cents by close of trade on Wednesday.
More will update soon!!
