Carnage in the global markets continues on Monday as the uncertainty of Brexit weighs on stock markets.
In Europe, The U.K. FTSE are down more than 2 percent and Italy’s market is dropping by 2.4 percent. The bank stock sellout is behind those bad numbers. Italian banks, which have been on shaky ground all year, fell by 25 percent and British bank stocks stopped trading altogether at one point.
In currencies, the Euro and the British pound are falling 1.1 percent and 3.8 percent respectively. Conversely, the dollar is getting stronger by the day. Not wanting to be left out of the currency race to the bottom, the Chinese central bank weakened its currency, the yuan, against the dollar this morning.
Crude oil is declining by 2 percent to $46 a barrel and the safe haven of gold is up almost 1 percent to $1,333 per ounce.
U.S. stocks are pointing to a loss of over 172 points to 17,228 for the Dow Jones Industrial average, the S&P 500 looks to be declining by 18 points to 2,019 and the Nasdaq is dropping another 51 points to trade near 4,656.
“Capital markets will do what they always do in such circumstances: overly discount the downside case and then slowly find their way to the more nuanced truth,” said Nicholas Colas, chief market strategist at Convergex, a global brokerage firm in New York. “For this week, that means a continued rally in the U.S. dollar and “Safe” global sovereign debt. Expect knee-jerk rallies too, as markets see-saw to a new equilibrium.”
Deborah Weinswig of Fund Global Retail and Technology wrote that for 2017, U.K. gross domestic product growth is likely to be between 1 percent and 1.5 percent lower that it would have been had the vote gone the other way. Prices will go higher as a result of the weaker pound and retail sales will probably soften.
U.K. retailers are continuing their slide this morning with Asos plc dropping over 7 percent to 3,520 GBp, or $4,655; Marks & Spencer Group plc is off by over 11 percent to 289 GBp, or $382, and Burberry Group plc is down 4.8 percent to trade at 1,072 GBp or $1,417.
Looking ahead, a two-day European Union leaders summit will begin tomorrow. The summit had already been scheduled and now the other leaders will be looking at the U.K. and expecting some answers as to next steps following the Brexit vote.