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Tokyo’s Nikkei drops nearly 3% on early Brexit vote results

Britain EU Referendum Updated: Jun 24, 2016 07:29 IST

A woman walks past an electronic stock board showing Japan's Nikkei 225 index at a securities firm in Tokyo.(AP)

Tokyo’s benchmark index plunged nearly three percent in volatile trade Friday as early results in Britain’s European Union membership vote pointed to stronger-than-expected support for exiting the bloc.

The Nikkei 225, which had opened higher, dramatically reversed course and slumped as much 2.96 percent, or 480.98 points, to 15,757.37 in morning trade, while the Topix index of all first-section shares tumbled 3.03 percent, or 39.29 points, to 1,259.42.

Both indexes later pared those losses, with the Nikkei down 0.59 percent and the Topix off 0.84 percent by 10:30 am local time.

Tokyo’s initial gains had extended a rise on Wall Street and in Europe overnight after traders grew increasingly confident that Britons would decide against pulling out of the 28-nation bloc.

But early results Friday from Sunderland in the northeast showed voters there had opted to leave the EU by a significant margin -- 61 percent against 39 percent in favour of staying.

That came after news that nearby Newcastle had seen a smaller-than-forecast win for “Remain”.

The final results of the vote will not be known until around 0800 GMT Friday.

“Investors are busy alternating between hope and despair, every time poll results are updated,” Hideyuki Suzuki, head of the investment information research department at SBI Securities, told AFP.

“If the ‘Remain’ camp is victorious, stocks will rally instantly as those who stayed away from trading will jump back into the market.

“If the ‘Leave’ camp wins, shares will plunge at first, but I think they’ll settle down pretty quickly.”

In forex markets, the yen surged -- usually a negative for Japanese shares -- in response to the initial vote results.

Japan’s currency briefly soared nearly three percent on the dollar to just above 103 -- its highest levels since 2014 -- as traders flocked to the safe-haven currency.

Investors tend to buy the yen in times of uncertainty and turmoil.

The pound briefly dived to just below $1.43 from above $1.50 -- its highest this year.

Japanese exporters were among the main losers on Friday, as the stronger yen sharply hit demand for their shares.

Toyota, rival Honda and factory robot maker Fanuc briefly dropped more than three percent before paring most of those losses.

Global equities had surged on Thursday as markets anticipated a win by the “Remain” camp in the knife-edge poll.

Hours before the voting finished, London’s benchmark FTSE 100 closed up more than one percent, while eurozone Frankfurt and Paris forged even higher.

On Wall Street, the Dow and broad-based S&P 500 each rose 1.3 percent, while the tech-rich Nasdaq gained 1.6 percent.