Brexit: Sterling hits new low & shares remain volatile, despite Osborne’s attempt to calm markets
The pound has hit a new 31-year low and shares in housebuilders and banks have sustained more losses as the effects of the Brexit vote continue to bite.
The FTSE 100 was down more than 100 points at 6,037, or 1.7 percent, on Monday – a fall not as large as feared.
Even so, there were some big losses.
Barclays shares fell more than 10 percent and Royal Bank of Scotland (RBS) fell more than 14 percent. The heavy losses caused their trading to be suspended temporarily as automatic circuit breakers kicked in.
EasyJet shares also fell – by 19 percent – following a statement from the airline saying Brexit would contribute to a fall in revenues of up to £28 million (about US$37 million).
Shares in housebuilders also took a dive. Taylor Wimpey fell 15 percent, Barratt Developments slumped almost 13 percent and Foxtons, which issues a Brexit profit warning, plunged 22 percent.
The FTSE 250 index, which contains smaller UK firms, slid by 5 percent on Monday.
Before the markets opened on Monday, Chancellor George Osborne attempted to reassure investors, saying the UK economy was “still open for business” and is “about as strong as it could be to confront the challenge our country now faces.”
The pound remained under pressure on Monday. After gaining some ground, sterling fell more than 3 percent against the dollar to $1.3192 – its lowest since 1985.
Against the euro, it was down to €1.1983, its lowest since March 2014.
The FTSE 100 fell more than 8 percent on Friday before recovering some ground to close 3.2 percent lower. The pound at its lowest on Friday was $1.3221.
Osborne has also said an emergency post-Brexit budget is unlikely to happen until a new prime minister is in place in October.
He said there would still need to be an “adjustment” in the economy but said it was “perfectly sensible to wait for a new prime minister” before taking any action.
Leading ‘Leave’ campaigner Boris Johnson responded to Osborne’s statement, saying “Project Fear is over.”
“There’s not going to be an emergency budget, people’s pensions are safe, the pound is stable, the markets are stable, I think that’s all very good,” Johnson told reporters.
Meanwhile, pro-Brexit minister Chris Grayling said there would still be a place for Osborne in the new government, saying the new administration would represent both those who backed ‘Remain’ and ‘Leave’ in the referendum.
“Of course it will be a matter for whoever the new prime minister is,” Grayling added.