London's FTSE100 index crashed more than 7 per cent in the first few minutes after markets opened around 4pm AEST, as voters in the UK elected to leave the European Union by a 52-48 margin, prompting Prime Minister David Cameron to flag his resignation.
London's FTSE100 index crashed more than 8 per cent in the first few minutes after markets opened around 4pm AEST, as voters in the UK elected to leave the European Union by a 52-48 margin, prompting Prime Minister David Cameron to flag his resignation.
The British pound dropped more than 8 per cent against the US dollar over the day's trading, reportedly a bigger daily fall than even during the GFC, while the FTSE100 recovered slightly and after about 50 minutes of trading was down just more than 4.6 per cent.
Mr Cameron said he would hand over to a new leader in time for the Conservative Party conference in about three months, although the EU mechanism for a country to leave would not yet be triggered, he said.
"I would reassure markets and investors that Britain's economy is fundamentally strong," he said.
Bank of England governor Mark Carney said British banks had been stress tested against far worse possibilities.
He said banks would have substantial capital and liquidty to keep lending to local firms and households.
"The Bank of England stands ready to provide more than 250 billion pounds of additional funds through its normal market operations," Mr Carney said.
The fallout
The reverberations were felt in Australia, too, with the ASX200 down more than 3 per cent and the Australian dollar dropping 3 per cent to US73.8 cents.
Now buying $US1.36, the pound hit its lowest level since 1985, although it has since slightly recovered.
When the polls closed, the leave vote was ahead 17.4 million to 16.1 million, with all 382 districts declared.
Japan's Nikkei 225 fell 7.9 per cent in Friday trade, while Hong Kong's Hang Seng fell 4.3 per cent at the time of writing.
Japan’s central bank was the first to step up offering liquidity, while gold, traditionally a safe haven commodity, was up 4.8 per cent to $US1,317.40 per ounce.
Speaking to Bloomberg, Credit Suisse chief investment officer Asia-Pacific John Wood predicted a round of monetary loosening from the Bank of England, possibly through quantitative easing.
Standard & Poors global chief rating officer Moritz Kraemer said that British government debt would be downgraded from its AAA rating “at least one notch”.
It may go further, he said.
Before a downgrade is issued, however, S&P will need to give the United Kingdom 24 hours notice, under EU regulations.
Crossing boundaries
Eurosceptic party leaders in France and the Netherlands have both called for referendums on EU membership in their countries.
French National Front leader Marie Le Pen has called the exit a victory for freedom, while Dutch Party for Freedom leader Geert Wilders has said it was time for a referendum in that country.
Scottish cabinet member Fiona Hyslop has said that the voters across the UK had made a decision against the interest of the Scottish people and there would be consequences for the country's relationship with the UK as a whole.
Scotland voted overwhelmingly to remain in the EU, but in a recent referendum about its position in the UK itself, voted to stay.
It has been reported that Scotland's parliament will seek another referendum on its position in the UK.
Gold
Australian gold stocks fared extremely well, however, with the top five movers in the ASX200 all gold stocks at the time of writing.
Evolution Mining led the way, up 13.7 per cent to $2.49, while Regis Resources was 9.8 per cent higher at $3.58.
St Barbara lifted 8.7 per cent to $3.10, Saracen Mineral Holdings rose 8 per cent to $1.42, and Northern Star Resources moved up 9.9 per cent to $5.02.
Australia
Prime Minister Malcolm Turnbull said there was no need for Australians to be alarmed, and he had no doubt that European leaders would settle uncertainties in due course with good leadership.
“It is important to remember that the Australian economy is strong and resilient and has weathered global shocks before and weathered them well,” he said.
“I have no doubt that in due course, the British government will negotiate a satisfactory departure from the European Union.
“This could take several years.
“In the meantime I have no doubt that our relations with the United Kingdom, which are as close as any two nations' relations could be, will continue as positively and intimately as ever.
“Equally, with Europe, we have been negotiating a European free trade agreement, we have built strong ties with the countries of continental Europe, in particular France and Germany.
“I'm very confident that our negotiations towards a free trade agreement with the European Union will continue.”
