Britain’s decision to quit the European Union in last week’s shock referendum verdict is not only shaking Donald Trump’s presidential election campaign and roiling US markets.
European banks quoted on New York’s bourse such as Credit Suisse, Deutsche Bank, UBS, and Royal Bank of Scotland continued to get heavily hammered after initial losses endured in the wake of the so-called “Brexit” vote when markets opened on Friday and again on Monday.
These banks stand to lose more than US banks based in Europe, because the British banks are facing the prospect of losing their product passports which allow them to sell flexible financial products manufactured in the UK into the European single market. That includes European banks who “manufacture” products in the highly-flexible environment of the UK. As for RBS and Barclays they further feel the pain of a possible rate cut from the Bank of England in the coming months to see off the risk of economic recession.
Late on Monday, Standard & Poor’s went one worse than Moody’s negative outlook on sovereign United Kingdom. S&P downgraded Britain to AA with outlook negative – meaning setting up Britain for further downgrades if and when they can become justified.
This further will put pressure on banks in the UK and Europe because falling policy rates from the central bank already hurt the balance sheets of commercial banks, but the rising cost of credit in Britain as fallout of a rating downgrade only make matters even worse.
Credit Suisse shares closed down 8.8% at $10.50, while those of Deutsche Bank (NYSE:DB) ended down 5.8% at $13.87, Swiss UBS (NYSE:UBS) was down 8.1% at $12.81, and Britain’s banks took the biggest hits, with RBS (NYSE:RBS) down 13.6% at $4.69, while Barclays (NYSE:BCS) ended down a whopping 20.1% at $7.03.
Meanwhile, Donald Trump will deliver a major trade speech on Tuesday that his advisers are headlining as "declaring American economic independence," in a clear reference to the UK's “Brexit” decision to leave the European Union.
So far, global market reaction to the Brexit vote, which Trump strongly supported, has proved to be another nightmare for a campaign that hasn't had a lot of good news lately with the Republicans hesitating on endorsing him, and cash more or less running out.
At first the Brexit vote seemed like it could be a boost to Trump, highlighting the power of populism, a magnet for many British voters last week. But the extended market rout suggests it could backfire for him.
His Democrat rival Hillary Clinton has wasted no time in pillorying Trump for backing Brexit and the chaos she says that it has delivered.
Meanwhile, as race crime has risen in Britain following the Brexit result, with right-wing groups intimidating ethnic minorities such as the Polish worker community, social network and search engines Facebook (NASDAQ:FB) and Google-owned YouTube (NASDAQ:GOOGL) are using automation to remove extremist content from their sites, Reuters reports.
The strategy to remove such content from video platforms YouTube and Facebook is a major step forward for internet companies that are eager to whipe out violent propaganda from their sites and are under pressure to do so from governments around the world as attacks by extremists proliferate, from Syria to Belgium and the United States.
With the precedent set, the software they use could be applied to any other forms of racist or terror abuse online, although neither of the two companies have admitted to applying such technology.
The technology was originally developed to identify and remove copyright-protected content on video sites. It looks for "hashes," a type of unique digital fingerprint that internet companies automatically assign to specific videos, allowing all content with matching fingerprints to be removed rapidly.
Such a system would catch attempts to repost content already identified as unacceptable, but would not automatically block videos that have not been seen before.
With the overall damped Wall Street market, Facebook ended down 2.8% at $108.97 while Alphabet, owners of Google, ended down 0.6% at $681.14 on Monday.