Global share markets swung lower and sterling tumbled in Asia on Friday as early results from the UK’s vote on European Union membership proved unnervingly close, sparking a wave of profit-taking across risk assets.
Sterling collapsed as far as $1.4300 at one stage in wild trade, having earlier stretched to a high for the year at $1.5022. It was last at $1.4490 with no clear indication where it might end the day.
The euro turned tail to hit $1.1302 as an actual vote for Britain to leave could endanger the future of the entire bloc, and its single currency.
The safe-haven yen recouped early losses to stand at 104.66 per dollar while futures for Japan’s Nikkei shed 1%. EMINI futures for the S&P 500 were off a more modest 0.2%, having climbed 1.76% on Thursday.
Financial markets have been racked for months by worries about what Brexit, or a British exit from the European Union, would mean for Europe’s stability.
Early opinion polls had favoured the “Remain” camp. An Ipsos-Mori poll put the lead at 8 points while a YouGov poll found 52% of respondents said they voted to remain in the EU while 48% voted to leave.
Yet a trickle of official results showed the margins were nail-bitingly tight. Traders were particularly spooked by returns from Sunderland showing a large majority for the “Leave” camp and just a narrow win for “Remain” in Newcastle.
“Newcastle was a squeaky win for Remain but Sunderland was a huge kick in the ribs and the bottom has fallen out of the pound,” said Jeremy Cook, chief economist at international payments company, World First. “These markets are thin, liquidity is poor and a recovery is obviously possible but those traders who were looking to book a quick profit before a restful night’s sleep have had their ideas shattered.”
The result from North Warwickshire also showed a much stronger turnout for Leave than many expected.
Safe-haven bonds immediately came back into favour, with US 10-year Treasury futures jumping 19 ticks.
Investors also priced in even less chance of another hike in US interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.
Commodities likewise swung lower as a Brexit would be seen as a major threat to global growth. US crude eased 23 cents to $49.85 a barrel in erratic trade.