Brexit stuns investors, markets tumble

Stocks plunged in the United States (US) and worldwide on Friday after Britain voted to leave the European Union (EU). The result stunned investors, who reacted by rushing to the safety of gold and US government bonds as they wondered what would come next for Britain, Europe and the global economy.

US stocks gave up all their gains from earlier in the year. The Dow Jones Industrial Average tumbled 610.32 points, or 3.4 per cent, to 17,400.75. The Standard & Poor's 500 dropped 75.91 points, or 3.6 per cent, to 2,037.41. Both indexes took their biggest losses since August. The Nasdaq composite suffered its biggest loss since mid-2011, down 202.06 points, or 4.1 per cent, to 4,707.98. Indexes in Europe and Asia took even larger losses.

The British vote brought a massive dose of uncertainty to financial markets, something investors loathe.

Traders responded by dumping riskier assets that appeared to have the most to lose from disruptions in financial flows and trade: banks, technology companies and makers of basic materials. More shares were traded than on any day since August 2011, when Standard & Poor's downgraded the credit rating of the US government during a crisis over the budget and the country's debt ceiling.

EU Never lost a member

Britons voted to leave the EU over concerns including immigration and regulation. It's far from clear what that will mean for international trade or for Europe, as the EU, which was formed in the decades following World War II, has never before lost a member state.

"This vote is a step away from free trade," said Bob Doll, chief equity strategist at Nuveen Asset Management. "When you add to it the spectre of the last couple of years of terrorism, it causes the average individual ... to be more nationalistic, more populist, more protectionist."

Bond prices surged and yields fell. The yield on the 10-year US Treasury note dropped to 1.56 per cent from 1.75 per cent on Thursday, a large move.

Banks took the largest losses by far. Citigroup plummeted US$4.16, or 9.4 per cent, to US$40.30, and JPMorgan Chase fell US$4.45, or 6.9 per cent, to US$59.60. They have the most to lose in Britain's departure from the EU because they do a lot of cross-border business in Europe, based from their offices in London. They also become less profitable when bond yields fall, since that lowers interest rates on mortgages and many other kinds of loans.

Microsoft fell US$2.08, or 4 per cent, to US$49.83, and IBM gave up US$8.76, or 5.6 per cent, to US$146.59. DuPont gave up US$3.21, or 4.6 per cent, to US$66, and LyondelBassel Industries lost US$4.14, or 5.2 per cent, to US$74.91.

Pound fell dramatically

The pound fell dramatically to US$1.3638. At one point, the British currency hit a 31-year low.

Oil prices sank. Benchmark US crude declined US$2.47, or 4.9 per cent, to close at US$47.64 a barrel in New York. Brent crude, the international benchmark, fell US$2.50, or 4.9 per cent, to US$48.41 a barrel in London.

In addition to bonds, other safety assets also soared. Gold jumped US$59.30, or 4.7 per cent, to US$1,322.40. That's its highest price since July 2014. Silver rose 44 cents, or 2.5 per cent, to US$17.79 an ounce, its highest in more than a year. Gold producer Newmont Mining rose the most in the S&P 500 index. It climbed US$1.80, or 5.1 per cent, to US$37.19 and set a three-year high.

High-dividend utility companies made tiny gains. Consolidated Edison rose US$1.55, or 2 per cent, to US$78.41 and Duke Energy added 38 cents to US$82.43.

The vote only begins the process of Britain's departure from the EU, and it also begins years of negotiations over Britain's trade, business and political links. Observers wonder if other nations will follow in Britain's footsteps by leaving the EU.

"This is a negative in economic terms for the UK," said David Kelly, chief global strategist at JPMorgan Asset Management. "The EU will be very tough negotiators with them."

Investors had sent stocks higher this week as they gradually grew more confident, based on polls and the changing odds in the betting market, that Britain would stay in the E.U. They sent the pound to its highest price of the year and sold bonds, pushing yields higher. Those gains were rapidly undone on Friday.

Britain's FTSE 100 dropped 3.1 per cent. At one point, it was 8 per cent lower. The German DAX index sank 6.8 per cent and France's CAC 40 index tumbled 8 per cent.

Japan's Nikkei 225 finished a wild day, down 7.9 per cent, its biggest loss since the global financial crisis in 2008. South Korea's Kospi sank 3.1 per cent, its worst day in four years. Hong Kong's Hang Seng index tumbled 4.4 per cent and stocks in Shanghai, Taiwan, Sydney, Mumbai and Southeast Asian countries were sharply lower.

In other energy trading, wholesale gasolene sank 8 cents to US$1.53 a gallon. Heating oil fell 7 cents to US$1.46 a gallon. Natural gas lost 4 cents to US$2.66 per 1,000 cubic feet.

In other currency trading, the dollar fell to 102.24 yen from 104.47 yen, while the euro weakened to US$1.1121 from US$1.1351.

- AP