Financial markets tumbled after the UK voted to leave the European Union.
United States
Stocks plummeted Friday offsetting the rally that occurred earlier in the week. Stocks, closing near their lows for the day, followed Asian and European markets in the selloff. The Dow Jones industrials were down 3.4 percent, the S&P retreated 3.6 percent and the Nasdaq lost 4.1 percent. On the week, the Dow and S&P lost 1.6 percent each and the Nasdaq declined 1.9 percent. Going forward, the vote promised uncertainty as those involved figure out what will be the next step in resolving the situation.
The selloff began in Asia after the UK surprised investors (and virtually everyone else) as the British people voted 52 percent to 48 percent to leave the EU. While Brexit had been discussed intensely around the world in the run up to the poll, the actual decision to leave came as a surprise, sending the British pound to a 31-year low.
Global markets were caught off guard and plummeted during the day. The Brexit vote overshadowed the day’s US economic data, including a report showing a bigger than expected drop in durable goods orders in May. Orders dropped 2.2 percent on the month after jumping 3.3 percent in April. Excluding orders for transportation equipment, durable goods orders edged down 0.3 percent after rising by 0.5 percent in the previous month.
The market turbulence was accompanied by central bank assurances that policy makers stand ready to intervene. Governor Mark Carney said the Bank of England could pump billions of pounds into the financial system, while the European Central Bank said it will give banks all the funding they require to counter market turmoil. The Federal Reserve said it was “carefully monitoring” financial markets.
Banks including Citigroup, JPMorgan Chase and Goldman Sachs Group tumbled along with Caterpillar and Boeing. Energy shares retreated on falling energy prices. Ford dropped after saying Brexit will have an “adverse impact” on its operations. Parts makers Delphi Automotive and BorgWarner slumped as did General Motors and Penske Automotive Group.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$53.35 to US$1,315.50. Copper futures were down 2.3 percent to US$2.12. WTI spot crude was down 52 US cents to US$48.85. Dated Brent spot crude was down US$2.50 to US$48.41. The US dollar was up against the euro, pound, Swiss franc and the Canadian and Australian dollars. However, it declined against the yen. The Dollar Index was up 2.3 percent. The yield on the US Treasury 30 year bond was down 14 basis points to 2.41 percent while the yield on the 10 year note dropped18 basis points to 1.56 percent.
Europe
European markets plunged Friday, enduring their largest single session loss in nearly 8 years. Investors around the globe were stunned by the results of Thursday’s UK referendum after recent polls had provided expectations that the nation would remain a member of the European Union. The UK decided to leave the European Union after Thursday’s closely contested referendum. Those in favor of leaving the European Union garnered 51.9 percent of the vote, while 48.1 percent chose to remain. Prime Minister David Cameron announced Friday that he will step down in October.
The results of the referendum sent investors in a search for safe havens. The Swiss franc, gold and US treasuries all rose sharply on concerns the UK could tip back into recession. Meanwhile, the pound sterling plummeted to a 31-year low. In a statement Friday, the European Union said it stands ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the EU. The EU noted that until the process of negotiations ends, the United Kingdom remains a member of the European Union, with all the rights and obligations that derive from this.
Central banks across the world including the European Central Bank and several others in Europe and the Bank of Japan and the Federal Reserve said they were prepared for any contingency and stand ready to add extra liquidity when needed.
The FTSE lost 3.1 percent on the day but was still up 2.0 percent for the week. The CAC tumbled 8.0 percent and was 2.1 percent lower on the week. The DAX retreated 6.8 percent and lost 0.8 percent on the week. The SMI sank 3.4 percent Friday but added 0.4 percent on the week.
Banks including Deutsche Bank, Commerzbank, Société Générale, BNP Paribas and Credit Agricole plummeted. In London, Lloyds Banking Group, Barclays, Royal Bank of Scotland and Standard Chartered tumbled. Auto makers Volkswagen, Daimler, BMW, Peugeot and Renault also dropped on the day. Utility E.ON and RWE retreated. ThyssenKrupp and Salzgitter declined. In London, housing stocks were under intense pressure. Taylor Wimpey, Persimmon, Barratt Development and Berkeley Group plummeted. Germany’s Ifo business climate indicator rose to 108.7 in June from 107.8 in May.
Asia Pacific
Asian shares plunged Friday as election results indicated that the UK will leave the European Union. Risk assets retreated as investors sought safe haven assets such as treasuries, yen and gold.
The Shanghai Composite was down 1.3 percent due to tighter controls on capital outflows. The Hang Seng however, was down 2.9 percent. On the week, the Shanghai Composite declined 1.1 percent but the Hang Seng added 0.4 percent.
The Nikkei plunged 7.9 percent — its steepest drop since March 2011 — as the EU referendum results sent the yen soaring above ¥100 to its highest level in 21/2 years. On the week, the index lost 4.2 percent. Exporters bore the brunt of the selling, with Honda Motor, Nissan, Panasonic, Sony and Mazda Motor tumbling. Sharp plunged on news it will be moved to the second section of the Tokyo exchange from the first section. Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial along with Inpex, JX Holdings and Japan Petroleum retreated.
The S&P/ASX lost 3.2 percent and the All Ordinaries retreated 3.1 percent. The indices were down 0.9 percent and 1.1 percent respectively for the week. Energy stocks Woodside Petroleum, Santos, Origin Energy and Oil Search on falling oil prices. Miners BHP Billiton, Rio Tinto and Fortescue Metals Group also declined. The big four banks closed lower and investment bank Macquarie Group plummeted as Britain faced an uncertain future outside the European Union. Gold Miners Newcrest, Regis Resources, Norther Star Resources and Evolution Mining however soared along with gold futures to multiyear highs on safe haven demand.
The Kospi was 3.1 percent lower, its biggest single-day loss of the year. The won fell by the most in almost five years as investors braced for repercussions from Britain’s exit from the European Union.
Indian shares tumbled and the rupee crashed below the 68-level in early trading as global sentiment turned sour after Britain voted to leave the European Union. The Sensex initially plunged but the index recouped some losses and ended the session down 2.2 percent. The intra-day recovery came in after Finance Minister Arun Jaitley and Reserve Bank of India Governor Raghuram Rajan sought to calm investor concerns, saying a solid economy and planned government reforms would allow the country to deal with any fallout from the UK’s exit from the EU.
Global Stock Markets

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*

The following indicators will be released this week…

Europe

June 27

Eurozone

M3 Money Supply (May)

Germany

Retail Sales (May)

June 29

Eurozone

EC Business and Consumer Sentiment (June)

June 30

Eurozone

Harmonized Index of Consumer Prices (June flash)

Germany

Unemployment (June)

France

Consumption of Manufactured Goods (May)

July 1

Eurozone

Manufacturing PMI (June final)

Germany

Manufacturing PMI (June final)

France

Manufacturing PMI (June final)

Italy

Manufacturing PMI (June final)

Spain

Manufacturing PMI (June final)

UK

Manufacturing PMI (June final)

Asia/Pacific

June 29

Japan

Retail Sales (May)

June 30

Japan

Industrial Production (May)

July 1

Japan

Consumer Price Index (May)

Household Spending (May)

Unemployment (May)

Tankan Survey (Q2.2016)

Manufacturing PMI (June final)

China

Manufacturing PMI (June)

CFLP Manufacturing PMI (June)

Americas

June 27

United States

International Trade in Goods (May)

June 28

United States

Gross Domestic Product (Q1.2016 final)

Consumer Confidence (June)

June 29

United States

Personal Income & Spending (May)

Pending Home Sales (May)

June 30

Canada

Monthly Gross Domestic Product (April)

Industrial Product Price Index (May)

United States

Initial Unemployment Claims (week ending prior Saturday)

Chicago PMI (June)

July 1

United States

Manufacturing PMI (June final)

ISM Manufacturing Index (June)

Construction Spending (May)

Source: Fidelity

Fidelity disclaimer:

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