Brexit: taking stock

By DATA TEAM

MARKETS have suffered a rough few days. Following Britain’s stunning vote to leave the European Union, investors around the world revolted by dumping sterling and other assets tied to the British economy and piling into traditional safe-havens such as gold and the Japanese yen.

During the first two trading sessions following the referendum, sterling plunged 11%, the biggest drop since the pound floated in 1971. The FTSE 100, Britain’s main benchmark index, fell 5.6%, wiping out over £100 billion (now $133 billion, previously $150 billion) in market value. The more domestically-focused FTSE 250 tumbled 7.2%, its largest drop since the 1987 stockmarket crash. British banks and housebuilders, two sectors that are particularly vulnerable to an economic downturn, were hit especially hard. Airlines also took a dive, as investors bet that British travellers, whose cash is now worth considerably less in much of the world, will rein in spending.

As David Cameron, who announced he would resign as Britain’s prime minister on June 24th, met with European leaders on Tuesday to discuss Britain’s exit from the EU, markets appeared to settle down. The pound is now trading at $1.33, up 0.5% from yesterday’s close. The FTSE 100 and FTSE 250 rallied by 2.6% and 3.6%, respectively. In the coming days, as Britain begins to comprehend life outside the EU, markets may regain their footing. Sadly, much damage has already been done.