Britain battled to stop worldwide Brexit alarm Monday but failed to prevent the pound crumbling to a three-decade low against the dollar as European shares took a fresh plunge.
Asian markets had steadied a little after Britain’s June 23 vote to abandon the European Union wiped $2.1 trillion off international equity values Friday.
But investors started a new wave of selling in European trade and Wall Street followed suit as they grappled with the financial consequences of the Brexit referendum.
“Today I want to reassure the British people, and the global community, that Britain is ready to confront what the future holds for us from a position of strength,” Britain’s finance minister, George Osborne, declared before European financial markets opened.
Britain’s economy is “as strong as could be,” the minister said.
Hours later, the pound had skidded to $1.3194 in London trade, its lowest level against the dollar since September 1985.
London’s FTSE 100 index, which boasts many international companies, fell around 1.9 percent in mid-afternoon trading, masking steeper falls in key sectors likely to be affected by Brexit.
“George Osborne’s comments have clearly prevented a much more dramatic decline Monday morning, but markets will remain incredibly volatile throughout the long-winded process of exiting the EU,” said Interactive Investor equity strategist Lee Wild in London.
British budget airline EasyJet, which warned of a Brexit hit to sales, plunged by 23.5 percent. International Airlines Group, parent of British Airways and Iberia, dropped nearly 13 percent.
Royal Bank of Scotland shares slumped 15.8 percent. Lloyds Banking Group fell 9.2 percent.
British construction group Taylor Wimpey tumbled around 18 percent, while shares in Eurotunnel fell more than 12 percent.
One fifth of British business leaders are considering moving operations abroad after the referendum, according to a survey from leading business lobby group, the Institute of Directors.
“Any sense of calm is very fragile and the situation could change rapidly,” said Joe Rundle, head of trading at ETX Capital.
In euro zone equity trading, Frankfurt’s DAX 30 index slid 1.9 percent as the country’s biggest lender Deutsche Bank lost 5.5 percent. The CAC 40 in Paris extended its earlier weakness to stand more than three percent lower in mid-afternoon.
In Madrid, shares fell 1.2 percent, frittering away early gains after the ruling conservative Popular Party emerged on top in elections Sunday and vowed to try to form a government.
Traders said the FTSE was being supported by a weaker pound, which could well slip further.
Stephen Innes, senior trader at OANDA Asia Pacific, warned sterling “is extremely vulnerable.”
He also said there was “a huge concern that London’s status as the global financial capital will crumble” if it loses its “passporting” rights, which permit banks to locate themselves in Britain while offering products and services in the wider EU.
There are fears the British vote will usher in another global market rout just months after a China-fueled sell-off at the start of the year.
But Capital Economics economist Julian Jessop said it would be wrong to think another global financial crisis could be just around the corner.
“Even now, the FTSE 100 is still above its mid-June lows,” he said in a note to investors.
“On a trade-weighted basis, the pound is only back to where it was during most of the period from 2009 to 2015,” he added.
In Asian trade, Tokyo, Shanghai and Sydney markets advanced. Hong Kong slipped, however.
Morgan Stanley economist Chetan Ahya tipped a new round of monetary easing in Asia to limit the fallout.
“We think near-term focus of policymakers will be to mitigate adverse impacts on financial conditions. Specifically, we expect policymakers to introduce liquidity injections measures,” he said.
Chinese Premier Li Keqiang said Britain’s departure from the EU created new uncertainties in the world economy at a time when downward pressures on China’s economy are mounting.

Source: Arab News