Britain’s vote to leave the European Union battered the British pound by more than 11% Thursday night and into Friday morning, pushed down stocks in Asia and pointed to a day of steep falls across the world’s financial markets. It was a brutal drubbing for investors who had stacked up bets that the U.K. would choose to stay.
The pound traded as low as $1.3230 in London’s early hours, as a pink-fringed dawn rose over the city and the British Broadcasting Corp. called the referendum for Leave. That was the lowest level against the dollar since 1985, and an epic move for a developed-market currency. The pound edged back up and was at $1.36 by 7 a.m. Just hours before, it had peaked above $1.50. Futures markets in the U.S. pointed to the S&P 500’s opening down 5%; in Britain they indicated a fall in the benchmark stock index of nearly 9%.
Nothing was spared from the tumult. Brent, the international oil price gauge, shed 4.97% to $48.38 a barrel in early trade on Friday. London copper prices dropped nearly 3% to $4,643.50 a metric ton.
The vertiginous moves portend unruly trading ahead. Stocks had been on a steady uplift this week following a series of polls that suggested a victory for Remain. That enthusiasm continued through the day Thursday. By the time polls closed at 10 p.m. British time, gamblers had staked so many bets for Remain that betting exchange Betfair calculated a 94% chance that the side would carry the day.
Then the counting started. A hairbreadth win for Remain in Newcastle, in the northeast of England, started to deflate the pound, as did reports of Leave victories in smaller districts. Sunderland, a Labour-leaning port city where anger at the EU runs high, reported a 61.3% Leave tally. The pound slammed down, falling more than 3% in minutes.