European stocks fall as aftershocks ripple

British banks were again smashed despite George Osborne’s attempt to shore up confidence.

Investors are contemplating increasing political and economic uncertainty around the UK and Europe.

The pound fell to a three-decade low against the dollar Monday as European markets took a fresh hit, led lower by banks, airlines and property shares, despite the British government’s efforts to calm post-Brexit jitters.

Asian markets had steadied a little after Britain’s shock June 23 vote to abandon the European Union wiped $US2.1 trillion off international equity values Friday.

But investors embarked on a new wave of selling in European trade followed by a heavy sell-off on Wall Street, as they grappled with the financial consequences of the Brexit referendum.

London’s FTSE 100 index, which boasts many international companies, fell 2.5 percent at closing, masking steeper falls in key sectors likely to be affected by Brexit.

Eurozone indices saw even bigger losses.

“They are being dragged down by the banking sector, which has nothing left to hold on to such is the considerable uncertainty,” analysts at the Aurel BGC brokerage said.

Before Europe’s markets had opened, Britain’s finance minister, George Osborne, had sought to reassure Britain and its international partners that the country “is ready to confront what the future holds for us from a position of strength”.

Britain’s economy is “as strong as could be”, he said.

Hours later, the pound skidded to $US1.3194 in London trade, its lowest level against the dollar since September 1985, before a slight rebound.

“George Osborne’s comments have clearly prevented a much more dramatic decline Monday morning, but markets will remain incredibly volatile throughout the long-winded process of exiting the EU,” said Interactive Investor equity strategist Lee Wild in London.

Losses were especially acute in industries singled out by investors as most Brexit-vulnerable.

British budget airline EasyJet, which warned of a Brexit hit to sales, plunged more than 22 percent. Royal Bank of Scotland shares lost just over 15 percent, while British construction group Taylor Wimpey was also nearly 15 percent down.

The trend continued among US losses. Oil prices, meanwhile, also resumed their downturn.

“The decision by the British people has plunged world markets into a zone of major uncertainties. We are now entering uncharted waters,” economists at Groupama AM said.

In eurozone equity trading, Frankfurt’s DAX 30 index and the CAC 40 in Paris were both around 3.0 percent lower.

In Madrid, shares slipped 1.6 percent, frittering away early gains after the ruling conservative Popular Party emerged on top in elections Sunday and vowed to try to form a government.

Analysts said the FTSE 100 was being supported by a weaker pound, which could well slip further.

Stephen Innes, senior trader at OANDA Asia Pacific, warned sterling “is extremely vulnerable”.

He also said there was “a huge concern that London’s status as the global financial capital will crumble” if it loses its “passporting” rights, which permit banks to locate themselves in Britain while offering products and services in the wider EU.

There are fears the British vote will usher in another global market rout just months after a China-fuelled sell-off at the start of the year.

But Capital Economics economist Julian Jessop said it would be wrong to think another global financial crisis could be just around the corner.

“Even now, the FTSE 100 is still above its mid-June lows,” he said in a note to investors.

“On a trade-weighted basis, the pound is only back to where it was during most of the period from 2009 to 2015,” he added.

AFP