Seems hard to believe Britain actually voted to leave the European Union. It opens up a can of a hundred worms such as myriads of new political and financial accords to be renegotiated, new immigration policies established and opens new internal divisions among the nations of the UK.
Though ground zero was the UK and the plummeting pound, implications around the world were far reaching. Let’s start by examining what happened to global stock markets.
The first wave after the referendum results were in hit Asian markets which are mainly emerging with the exception of Australia, Japan and Hong Kong. Shanghai was down 1.3% (-19% YTD), India -2.2% (+1%), and South Korea -3.0% (-2%) respectively. Meanwhile, Japan swooned -7.9% (-21%), Australia -3.2% (-3%) and Hong Kong -2.9% (-8%).
When European markets opened the carnage continued: UK down -3.2% (-2% YTD), France -8% (-11%), Germany -6.8% (-11%) and Italy -12% (-27%). Apparently the EU markets and economic outlook suffered more than UK. Same story in the US with Dow plunging -3.4% (-0.1% YTD), S&P -3.6% (-3%), and Nasdaq -4.1% (-7%).
Looks like Fed hike is off the table until after the fall elections and the strong dollar caused by cratering currencies (except Japanese yen) will challenge US profits in the near term. The only certainty to come from Brexit is there will be much more uncertainty.
