Saturday 10 December 2016

Brexit: European shares fall again, investors seeking safe havens

Published 06/07/2016 | 08:49

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt. Photo: Reuters
Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt. Photo: Reuters

European stocks fell on Wednesday, led lower by a drop in the shares of major banks, as persistent worries over Britain's vote to leave the European Union weighed on markets.

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The pan-European STOXX 600 and the similar FTSEurofirst 300 index were both down by 0.5 percent.

The STOXX Europe 600 banks index fell 1.2 percent, with shares in Spain's Caixabank down 1.8 percent after Caixabank warned it expected a €1.25bn hit related to mortgage clauses.

Asian share markets turned tail on Wednesday as fears over instability in the European Union returned with a vengeance, sending the pound to three-decade lows and hammering risky assets of all stripes.

In frantic trading reminiscent of the fateful Friday after Britain voted to abandon the EU, sterling shed a full U.S. cent in a matter of minutes to crater at $1.2798 GBP=D4.

Perhaps taking advantage of the distraction, Beijing allowed the yuan to fall to the lowest since late 2010 CNY=CFXS and secure a competitive advantage for its exports.

Concerns that central banks might not be able to soften this latest blow to global growth hit commodities hard. Having shed near 5 percent on Tuesday, Brent crude oil LCOc1 fell further to $47.84, with U.S. crude at $46.43 a barrel.

Spooked investors rushed into safe-haven sovereign debt and took markets deeper into unknown territory.

Yields on U.S. Treasuries, the benchmark for bonds worldwide, hit record lows out to 30 years. The 10-year note offered just 1.35 percent US10YT=RR and investors were willing to pay Japan 0.27 percent to lend Japan money for a decade.

"There's no inflation prospects, there's no strong growth. The only thing we have is uncertainty," said Hiroko Iwaki, senior bond strategist at Mizuho Securities.

The sudden mood swing saw Japan's Nikkei .N225 skid 2.5 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.5 percent.

Reuters

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