London’s FTSE 100 index closed below 6,000 on Monday, and dropped by nearly as much as it lost on Friday in the wake of the shock UK referendum decision to quit the European Union.
The blue-chip index lost 156 points, or 2.6%, to end at 5,982. On Friday, the bourse lost 3% after Thursday’s EU “Brexit” referendum. The FTSE100 was last below 6,000 on June 17 when it briefly looked like the "Leave" camp were in the ascendancy before the "Remain" camp regained, according to opinion polls which now look hollow.
Meanwhile, the FTSE AIM 100 Index, which began to recover on Friday after an initial nose-dive, ended Monday pretty much where it was when markets opened on Friday post-Brexit shock. The smaller-cap index was down 4.6% at 3,188. The FTSE AIM All-Share Index closed down 3.8% at 676.
In all, 57% of London stocks lost on Monday, 16% gained and 28% were unchanged on the day.
Although there is considerable uncertainty about what happens next for the British economy, there is also an equal measure of speculation – and most of it negative – about the future, with predictions of recession and retribution from Britain’s former EU trading partners.
The credit swaps market was now pricing in a 15% chance of UK interest rates turning negative over the course of the next year, on the back of the EU referendum result.
The money market is now also giving a 50% chance of an interest rate cut in July, a 65% chance of a cut by August, and an 80% chance of a cut by the end of the year.
Banks remained among the biggest losers- not only because negative interest rates spell gloom for their balance sheets - as investors worried about the hit they may take from potential loss of easy access to continental European markets, the so-called financial product “passport”.
Royal Bank of Scotland PLC (LON:RBS) dropped 15.35 to 173.8p – recovering from 20% down intraday - but Barclays PLC (LON:BARC) extended losses into the close and was off 17.35% at 127.2p.
House-builders also lost out amid worries about the impact of Friday’s UK vote to leave the EU on house prices.
Barratt Developments PLC (LON:BDEV) subsided 19.4% to 354.4p and Taylor Wimpey (LON:TW.) shed 16.3% to 113.98p.
Budget airline EasyJet (LON:EZJ) dropped 22.3% to 1020p while estate agent Foxtons (LON:FOXT) was off 22.6% at 104.5p. Both companies issued profit warnings on Monday.
EasyJet warned that the outcome of the UK's EU referendum would hit second-half revenue, while Foxtons said the run-up to the EU referendum led to significant uncertainty across London housing markets.
However, other firms have shrugged off Brexit fallout. For example, plastics specialist Symphony Environmental Technologies plc (LON:SYM) said the UK’s decision to leave the EU on Friday will not adversely affect the business and the group was on track to meet market expectations. Its shares ended up 3.6% at 5.7p.
Precious metal miners also got a boost as investors sought refuge in gold, boosting prices of the yellow metal. Randold Resources Limited (LON:RRS) lifted 9% to 8035p and Fresnillo Plc (LON:FRES) gained 7% to 1482p.
Midsession
London's top-flight shares extended losses on Monday amid ongoing jitters sparked by last week's Brexit vote.
The FTSE 100 Index fell 95.7 points to 6,043 while even small-cap stocks took a hit, with the FTSE Aim 100 off 89.79 points at 3251 and the Aim All-Share down 15.7 points.
Banks remained among the biggest losers as investors worried about the hit they may take from potential loss of easy access to continental European markets.
Royal Bank of Scotland PLC (LON:RBS) dropped 20.2% to 163.8p and Barclays PLC (LON:BARC) was off 15.85% at 129.5p.
House-builders also lost out amid worries about the impact of Friday’s UK vote to leave the EU on house prices.
Barratt Developments PLC (LON:BDEV) subsided 16.2% to 368.4p and Taylor Wimpey (LON:TW.) backtracked 15.2% to 115.4p.
But precious metal miners got a boost as investors sought refuge in gold, boosting prices of the yellow metal. Randold Resources Limited (LON:RRS) lifted 8.3% to 7980p and Fresnillo Plc (LON:FRES) gleamed 8% to 1497p.
Mike van Dulken at Accendo Markets said: “Weekend political upheaval from both sides and a leadership vacuum has done little to calm investor nerves about the near-term future.”
Among small-caps, Craven House Capital PLC (LON:CRV) soared 35.7% to 1.425p as the AIM-listed stock said it wanted to move to the specialist fund part of the main market.
East Africa-focused miner Shanta Gold Limited (LON:SHG) glittered 13% to 7.63p on news that its New Luika mine in Tanzania had received all necessary approvals and development had started.
Anglo Asian Mining Plc (LON:AAZ) ticked up 10.7% to 15.5p as the Azerbaijan-focused gold, copper and silver producer posted record production despite tough markets.
Surgical Innovations Group PLC (LSE:SUN) got a 0.125p shot in the arm to 1.825p as it forecast an increase of at least 10% in first-half revenues.
FairFX Group Plc (LON:FFX) also rose 6.8% to 31.5p on news of buoyant foreign exchange trading in market volatility following the referendum vote.
But Biome Technologies PLC (LON:BIOM) dropped 24% to 110p as the bioplastics and radio frequency technology developer forecast first-half revenues below its expectations.
And back among larger stocks, estate agent Foxtons Group PLC (LON:FOXT) fell 22.6% to 104.5p after warning on profits following the EU vote.
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Preview at 6.57am
The continued shockwaves from Britain’s decision to leave the EU, combined with Labour’s decision to press the self-destruct button, will likely drive the FTSE 100 sharply lower on open.
The spread-betting firms are predicting the index of blue-chip shares will fall around 180 points to 5,958.69.
In morning trading in Asia, the currency market gave its verdict on the political chaos here in the UK, driving the pound down a 2% to US$1.3404 against the dollar.
Investors headed for haven investments such as gold, which advanced 1.5% to US$1,335.55.
Chancellor George Osborne is expected to make a statement later this morning in a bid to calm the roiling markets.
What seems to have really unsettled investors is the fact the UK appears to have made few provisions for Brexit.
“The lack of policy planning reflects badly on a UK political class more intent on being right than looking after the best interests of the country, irrespective of the outcome,” said Michael Hewson of CMC Markets.
Amid the gloom, Asia’s major markets traded higher with Japan Nikkei 225 up almost 2% and aided by currency factors.
The Shanghai Composite rose 1.1% and the Australia’s ASX edged 0.5% higher. Hong Kong’s Hang Seng was one of the few laggards, down 0.5%.
That said, the gains were made on light traded volumes and all eyes will be on London and the frosty conversations still to be had over the UK’s reverse out of the EU.
The air of uncertainty hasn’t been helped by the fact the Tories are now embarked on what commentators expect to be another divisive and toxic leadership campaign.
At the same time, any pretence of effective opposition dissolved with the sacking of shadow foreign secretary Hilary Benn, which yesterday prompted a wave of resignations from Labour’s front bench.
*Brent fell 15 cents at US$48.26 a barrel.