Why Britain Voted to Leave the EU

The pound plunged by a record and the euro slid by the most since it was introduced in 1999 as the BBC projected a victory for the “Leave” campaign with most votes counted in Britain’s referendum on membership of the European Union. South Africa’s rand led slides among the currencies of commodity-exporting nations as oil sank to about $47 a barrel and industrial metals slumped. The yen surged and gold soared with sovereign debt as investors piled into haven assets. European and U.S. futures tumbled as Asian stocks dropped by the most in five years.

“It’s scary, and I’ve never seen anything like it,” said James Butterfill, head of research and investments at ETF Securities, said by phone from London. “We’re going to see outflows from basically any kind of cyclical asset. A lot of people were caught out, and many investors will lose a lot of money.”

The debate over the U.K.’s EU membership has dominated investor sentiment throughout June, with appetite for riskier assets having built up over the past week as bookmakers’ odds suggested the chance of a so-called Brexit was less than one in four. The victory for the “Leave” campaign will fan speculation that more countries could withdraw from the EU. Central banks are standing readyto intervene as reaction in financial markets proves reminiscent of late 2008, at the height of the global financial crisis.

Just after 6 a.m. London time, with most votes in, the BBC said there was no way back for the pro-EU side, with voters having backed “Leave” by 52 percent to 48 percent. U.K. Prime Minister David Cameron warned Brexit would tip the country into recession, while JPMorgan Chase & Co. and HSBC Holdings Plc said such as outcome would lead them to move thousands of jobs out of London. S&P Global Ratings said the U.K. is likely to lose its AAA credit rating, Financial Times reported.

These are among the most notable moves in global financial markets:

• British pound falls as much as 11 percent to $1.3229, weakest since 1985
• Yen jumps 3.7 percent to 102.35 per dollar, after surging past 100 for first time since 2013
• Japan’s Topix index leads Asian stock losses, down more than 7 percent
• FTSE 100 Index futures tumble 9 percent; contracts on Euro Stoxx 50 slide 11 percent
• S&P 500 Index futures slump as much as 5.1 percent, the maximum move allowed
• Yield on 10-year Treasuries drops 29 basis points to 1.46 percent, set for biggest daily decline since 2009; similar Japanese yield reaches record-low minus 0.215 and Germany’s plunges to an unprecedented minus 0.175 percent
• New York crude oil retreats 5.1 percent to $47.56 a barrel, poised for biggest loss since February
• Gold rallies as much as 8.1 percent to $1,358.54 an ounce, highest since March 2014
• South Africa’s rand plunged 7.1 percent against the dollar and reached a record low versus the yen
• Poland’s zloty dropped by the most since 1993
• The iTraxx Asia index of credit-default swaps rose by the most in three months

Currencies

The pound was down 7.1 percent as of 7:07 a.m. in London. Its biggest one-day loss prior to that was a move of 4.1 percent recorded in 1992, when the currency was forced out of Europe’s exchange-rate mechanism.

“Market liquidity and overall liquidity in the U.K. is drying up as we speak in a very rapid way,” said John Woods, chief investment officer for Asia-Pacific at Credit Suisse Private Banking, told Bloomberg TV in Hong Kong. “It’s highly likely that we see monetary easing in a coordinated response” from central banks across the world, he said.

The euro slumped 3.2 percent, while currencies in Norway, Sweden and Turkey posted even steeper losses. Japan’s currency jumped by the most since 1998 versus the dollar.

“All hell is breaking loose,” says Vishnu Varathan, a senior economist in Singapore at Mizuho Bank Ltd. “The only surefire is you buy yen, you buy U.S. Treasuries, you buy gold, and you sit tight.”

Stocks

The MSCI Asia Pacific Index declined 4.3 percent as benchmarks retreated across the region.

British insurer Prudential Plc, HSBC and Standard Chartered Plc all slid more than 9 percent in Hong Kong. Glencore Plc tumbled 12 percent.

Commodities

The Bloomberg Commodity Index fell 1.6 percent, its biggest loss in a month.

Crude oil tumbled as much as 6.8 percent in New York. Copper and nickel dropped more than 2.5 percent in London. Gold was up 5.2 percent.

“Gold will be a preferred safe-haven asset with a ‘Leave’ vote,” said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp, who forecast that it could rally to as much as $1,400 if ‘Remain’ loses. Bullion’s expected to remain volatile until the final verdict is out, according to Gan.

Bonds and Money Markets

A gauge of where bank borrowing costs will be in the months ahead, known as the FRA/OIS spread, hit the most extreme level since 2012 on Friday in Asia as the referendum sapped investor appetite for risk and spurred concern some European banks will find it harder to fund themselves. The three-month FRA/OIS spread widened to 0.32 percentage point, compared with 0.27 on Thursday.

“Equity futures, gold, U.K. bank and insurance stocks are all sounding off their market stress sirens, and the funding market will go into its usual precautionary mode,” said Sean Keane, an Auckland-based analyst at Triple T Consulting and the former head of Asia-Pacific rates trading at Credit Suisse Group AG. “We would expect the Bank of England to immediately add liquidity in extra size today, and the ECB will follow. USD swap lines with the Federal Reserve may be used, and other central banks will be on alert.”