Worst Financial Shock since the Great Depression

Global stock markets lost about $2.08 trillion in value on Friday after Britain voted to leave the EU, which was the biggest daily loss ever, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis and the Black Monday stock market crash of 1987.

Global markets declined following the unexpected result of the 23^rd June referendum, in which Britons voted to leave the EU by 52% to 48% and caused British Prime Minister David Cameron to step down.

The European markets were hit the worst, with Milan .FTMIB and Madrid .IBEX both down more than 12% for their biggest losses ever. Britain's benchmark FTSE100 on the other hand, fell by 9% at one point on Friday, but rallied to close below 3.15%. The route started in Asia, with the Nikkei fell by 7.9%, and then moved to Wall Street as the S&P 500 was down 3.6%.

In dollar terms, Friday's loss exceeded the previous record from 29^th September 2008, the day when the U.S. Congress rejected a $700 billion bailout package for Wall Street during the global financial crisis. On that day, global markets lost $1.94 trillion. On the other hand, the U.S. dollar index rose by 2.3% vs. a basket of currencies and traded at 95.60 pips at the end of last week’s trading session.

GBP traded at $1.34 and could decline further to $1.30. Euro trading around $1.10 and could close the gap before retreating. The single currency is waiting European Central Bank's annual summit in Portugal this week.

On Friday, JPY touched ¥102 vs. USD and could re-test the psychologically important level of ¥100 vs. USD. As the Japanese yen comes close to that price, the bank of Japan is almost certain to act.

Gold jumped to $1,357 on Friday and ended the trading session at $1,315. From a technical point of view, the precious metal could re-test $1,300 but it is hard to do so, as Fed undecided on when next to raise interest.

Oil declined sharply on Friday, negatively affect by the Brexit vote. WTI traded at $47.50 and could settle at $47.

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.