UK markets plunge, sterling eyes biggest ever fall, as EU vote in balance

London: British markets plunged on Friday, with sterling on track for its biggest ever one-day fall and UK stock futures pointing to a steep fall at the market open, after EU vote counts indicated Britons could be on course to leave the European Union.

 

The pound had hit a 2016 high above $1.50 after an earlier opinion poll showed a 52-48 percent outcome in favour of `Remain`, but fell sharply as the area counts came in and showed that the final outcome could be closer, or even the reverse.

After results from 150 of 382 counting areas and partial tallies from Northern Ireland, Remain was on 48.9 percent and Leave was ahead with 51.1 percent, Reuters calculations showed.

Sterling tumbled over 10 cents from its peak, marking a fall of 6 percent -- greater even than `Black Wednesday` in 1992 when billionaire financier George Soros was instrumental in pushing the pound out of the Exchange Rate Mechanism -- and the depths of the 2008 global financial crisis.

London bankers working through the night said they hadn`t seen anything like the volatility sweeping across UK assets.

 

"It`s extraordinary," said John Wraith, Head of UK Rates Strategy, UBS Investment Bank.

"`Shock` probably isn`t too strong a word. People will come in this morning earlier than usual, so it`s a skeleton staff right now. But shock was the first reaction. Now it`s all hands on deck trying to deal with the volatility," he said.

The pound fell as low as $1.3979, while UK stock market futures contracts pointed to a fall of 6 percent when the London market opens at 0700 GMT.

 

Both sterling and stock futures recovered ground as Remain edged back in the lead. But with the final result not expected until around 0600 GMT and looking too close to call, traders remained on edge.

"Markets are very nervy at the moment," said Joe Rundle, head of trading at ETX Capital in London.

"It`s definitely tin hats time. If Leave wins there will be carnage for cable," he said, referring to the sterling/dollar exchange rate.

Amid very thin liquidity conditions, one-week sterling/dollar implied volatility rebounded to around 37 percent from a low of 19 percent, even higher than the 25 percent just before the polls closed and another indication of how jittery markets are .

Hong Kong-listed shares of HSBC and Standard Chartered fell more than 3 percent, indicating a sharp decline in these stocks when they start trading in London.

The referendum on whether to quit the EU was bitterly-contested, and polarized the nation. Financial markets, on edge for weeks over the uncertain outcome, rallied on the strength of late polls that showed a swing towards staying in.

Banks had warned clients about volatile trading conditions around the results which may lead to large gaps in prices. Barclays stopped accepting new "stop loss" orders as of 0600 GMT, an extremely rare move for one of the big six banks that dominate the world`s biggest financial market.