World markets dive as Britain votes to leave the European Union

World financial markets have dived in reaction to Britain voting to leave the European Union.

The sterling suffered its biggest one-day fall of 9.4 percent against the US dollar.

The vote to leave also raises questions over London’s role as a global financial capital, and ushers in months of political limbo.

The euro slumped nearly four percent against the US dollar on concerns a ‘Brexit’ vote would do wider economic and political damage to what would become a 27-member union. Investors poured into safe haven assets including gold, and the yen surged.

In an early mark of international concern, Japan’s top currency diplomat Masatsugu Asakawa said he would consult with Finance Minister Taro Aso on how to respond to the market moves, describing the foreign exchange moves as very rough.

Yet there was euphoria in Britain.

“Dare to dream that the dawn is breaking on an independent United Kingdom,” said Nigel Farage, leader of the UK Independence Party.

“If the predictions are right, this will be a victory for real people, a victory for ordinary people, a victory for decent people…Let June 23 go down in our history as our independence day.”

He called the EU a “doomed project”.

Asked if Prime Minister David Cameron, who called the referendum in 2013 and campaigned to stay in the bloc, should resign if Britain voted for Brexit, Farage said: “Immediately.”

Quitting the EU could cost Britain access to the EU’s trade barrier-free single market and mean it must seek new trade accords with countries around the world. President Barack Obama says it would be at the “back of a queue” for a US pact.

The EU for its part will emerge economically and politically weakened, facing the departure not only of its most free-market proponent but also a member country that wields a UN Security Council veto and runs a powerful army. In one go, the bloc will lose around a sixth of its total economic output.

Cameron is expected to formally report the result to his European counterparts within days and prepare negotiations for the first exit by a member state from the EU – an exit he has said would be irreversible.

The British leader called the referendum in 2013 in a bid to head off pressure from local eurosceptics, including within his own party. Initially billed as an easy ride, the vote has now put his political future on the line. Party ally Boris Johnson, the former London mayor who became the most recognisable face of the “leave” camp, is now widely tipped to seek his job.

Opinion polls had see-sawed throughout the four-month campaign, but the Remain camp edged ahead last week after a pro-EU member of parliament, Jo Cox, was shot and stabbed to death.

In the end though, the pro-EU camp was powerless to stop a tide of anti-establishment feeling and disenchantment with a Europe that many Britons see as remote, bureaucratic and mired in permanent crises.

As the fallout begins, experts have weighed in on the global consequences of the result.

European Council President Donald Tusk gave perhaps the most dramatic of any warning from a global leader, suggesting last week that this could be the end of the West as we know it.

“As a historian, I am afraid this could in fact be the start of the process of the destruction of not only the EU but also of Western political civilisation,” he told Germany’s Bild newspaper.

The British pound took a wild ride on the markets as results began coming in Thursday night, with a series of victories for the anti-EU camp fuelling a slump in the currency hours after it touched a 2016 high of $1.50.

US billionaire George Soros, who famously profited by betting against the pound in a 1992 currency crisis, predicted a “Black Friday” if Britain votes to leave.

“If Britain leaves the EU it will have at least one very clear and immediate effect that will touch every household: the value of the pound would decline precipitously,” he wrote in the Guardian on Monday.

Prime Minister David Cameron took a huge gamble in calling the referendum in 2013.

As the results began trickling in Thursday night, 83 lawmakers from his Conservative Party released a letter urging him to stay in his post regardless of the outcome.

But there is a widespread belief that after leading the campaign to stay in the EU, Cameron would have no choice but to quit if he lost.

Conservative former finance minister Ken Clarke put it bluntly: “The prime minister wouldn’t last 30 seconds if he lost the referendum.”

“A UK vote to exit the European Union could have significant economic repercussions,” US Federal Reserve Chair Janet Yellen said this week.

“It would usher in a period of uncertainty that is very hard to predict,” she added, warning of volatility in global markets.

The International Monetary Fund issued a similarly downbeat assessment, warning that Brexit could deal the British economy a “negative and substantial” blow, possibly sinking back into a recession.

The Washington-based lender also warned that “contagion effects” from the decision could hit markets worldwide.

In a report released last month, the British Treasury offered two potential scenarios, neither of them cheerful: either a 3.6-percent or six-percent drop in GDP two years after a Brexit.

Roberto Azevedo, head of the World Trade Organization, warned that re-negotiating Britain’s trade deals would prove a huge headache following a Brexit.

British exporters would risk an extra £5.6 billion ($8.2 billion, 7.2 billion euros) of annual customs duties, he said this month — and it would also need to renegotiate the terms of its WTO membership.

“Key aspects of the EU’s terms of trade could not simply be cut and pasted for the UK,” Azevedo said.

“Negotiations merely to adjust members’ existing terms have often taken several years to complete — in certain cases up to 10 years, or more.”

European Commission chief Jean-Claude Juncker warned on the eve of the vote that there would be no turning back if Britain decided to quit the EU.

© ninemsn 2016

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