Global markets lost $2tn over Brexit – FT

Global stock markets lost more than $2tn of value on Friday in the largest single day drop since at least 2007, as investors dumped risky assets and rushed into havens after the

UK voted to leave the EU, the Financial Times reports.

The fall precedes what is expected to be a volatile week of trading when global markets reopen on Monday. Investors and strategists say that much of Friday’s decline was a “knee-jerk” move, unravelling last-minute confidence that drove up stock prices ahead of the referendum results.

The slide included a $830bn loss on the valuation of US stocks, with $657bn struck from the benchmark S&P 500. The overall $2.1tn decline was the worst performance since S&P Dow Jones Indices started tracking data in 2007.

“I don’t think the news came out with enough lead time to have institutional investment committees sit down and decide what to do,” said Thierry Albert Wizman, a strategist with Macquarie. “This is an automated response to what has happened. Human decision making will intervene.”

The losses included roughly $400bn from the global financial sector, as fears mount over slower economic activity and lower benchmark interest rates at which to lend, an FT analysis found. The declines knocked roughly 5 per cent from the valuation of publicly traded companies within the S&P global broad market index, which fell to $41.5tn.

Emerging markets were spared the worst of the selling, with market values declining by $128bn.

Investors are expected to spend the weekend studying their positions and analysing what the long-term ramifications of the Brexit vote are for financial markets and global economies. Traders at several firms said they were on high alert for potential counterparty risk after violent price swings threatened possible losses.

“How will this impact global growth? How will this impact investor confidence? What are the implications of Brexit on the sanctity of the ‘irreversible’ EU?,” said Katie Nixon, Northern Trust Wealth Management’s chief investment officer.

“The answers to these questions require time. Right now, investors are repricing assets in order to reach a level where there is adequate compensation for these heightened risks.”

Central bankers will meet over the weekend in Basel, Switzerland for a pre-scheduled meeting, and are expected to discuss the potential fallout from the UK referendum.

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