US stock market suffers worst drop in 10 months
The US stock market has had its worst drop in 10 months after Britain voted to exit the European Union and UK Prime Minister David Cameron subsequently announced his resignation.
Some 51.90 percent of British voters opted to leave the EU, while roughly 48.10 percent of people voted to stay in the union in a historic referendum on Thursday.
Cameron announced on Friday that he would leave office in fall- by October- when his ruling Conservative Party will hold a conference.
Brexit dealt a severe blow to the US stock market on Friday, with the Dow Jones Industrial Average plunging by 3.4 percent, the Standard & Poor's 500 falling by 3.6 percent and the Nasdaq plummeting by 4.12%.
US crude also had a decline of 5 percent, or $2.47, reaching $47.64, its biggest one-day drop since February.
According to the Wilshire 5000 index, Brexit caused around $800 billion in US market value to be erased.
Eric Wiegand, senior portfolio manager at US Bank Wealth Management, said investors had a “false sense of security” that Britons would vote against a Brexit.
“With last night’s result, that’s certainly unwinding,” Wiegand said Friday. “It caught the consensus on the wrong side yet again. Complacency had crept back into the markets.”
Also, Bob Stovall, US equity strategist at S&P Global Market Intelligence, said that plunging prices would reveal “long-term buying opportunities, particularly for mid- and small-cap stocks” not as exposed globally.
"In the short term, markets will trade on emotion, so make sure you don’t end up becoming your portfolio’s worst enemy,” he said, calling on investors to “stay calm and carry on.”
Meanwhile, the British pound sterling fell by 10% to a 31-year low, and the euro dropped by 3.8%.
UK stock futures also pointed to a sharp fall at the market opening. British stock market plunged 7.7% while German index fell 10%. In Asia, Tokyo stocks dived more than 8% on the Brexit shock as the Hong Kong index plunged over 5% on the news.
Credit ratings agency Moody's said Friday the UK government’s fiscal strength is likely to go down and the country's economic growth prospects could be "materially weaker" than expected.
"Moody’s expects a negative impact on the economy unless the UK government manages to negotiate a trade deal that largely replicates its current access to the single market," it said. "However, at the moment there is substantial uncertainty over the type of trade agreement that could be achieved."
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