FTSE 100 Plunges By £120bn After Brexit

Markets were plunged into turmoil after the UK voted to leave the EU with tens of billions of pounds wiped off the FTSE 100's value and the pound plunging to a 31-year low against the US dollar.

London's leading share index fell by 7%, or nearly 500 points, minutes after opening, reducing the paper value of its constituent companies by more than £120bn.

The turmoil prompted an intervention by the Bank of England, which made available a £250bn war chest to support markets while governor Mark Carney pledged that it would not hesitate to take further measures - amid speculation that it would slash interest rates to zero.

Later the FTSE 100 made a partial recovery but was still almost 300 points, or 4.5%, down.

Shares (Berlin: DI6.BE - news) in house builders were worst hit with Charles Church owner Persimmon (Other OTC: PSMMF - news) down by more than 20%, together with Taylor Wimpey (LSE: TW.L - news) , Barratt and Berkeley.

Banks were badly affected too, with state-backed Royal Bank of Scotland (LSE: RBS.L - news) and Lloyds Banking Group (Other OTC: LLOBF - news) , as well as Barclays (LSE: BARC.L - news) , off by 20%.

British Airways owner International Airlines Group issued a profit warning hours after the result became clear, saying earnings growth for 2016 would not match that of last year. Shares were down 20%.

There were steep falls in European markets on opening too, with Germany's Dax down 8% and France's Cac 40 off 10%.

The Ibex in Spain was 12.5% lower in afternoon trading while Italy's Mib was 11% down - reflecting greater concern that the eurozone's recovery will be particularly badly damaged.

Matt Sherwood, head of investment strategy at fund manager Perpetual (Other OTC: PRPLF - news) , said: "Obviously, there will be a large spill-over effects across all global economies ... Not only will the UK go into recession, Europe will follow suit".

The UK's decision to quit the EU sent the pound plunging to the lowest level since 1985 at one stage. The sharp dive in the currency was even bigger than on Black Wednesday in 1992.

The Bank of England said it was "monitoring developments closely" and pledged to "take all necessary steps to meet its responsibilities for monetary and financial stability".

Governor Mark Carney said market and economic volatility was to be expected as the UK negotiates new relationships with Europe and the rest of the world but that it was "well prepared for this" after extensive contingency planning with the Treasury.

He said the Bank was ready to provide more than £250bn of additional funds to keep markets functioning and that it would not hesitate to take further measures.

Some experts predicted that the Brexit vote would send the UK back into recession and there was speculation that interest rates could be cut from 0.5% to zero in coming months to cushion the economy from the expected blow.

Ratings agency Standard & Poor reaffirmed its previous warning that the UK stood to lose its AAA credit rating following a Leave vote.

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The collapse in the pound will be of immediate concern to holidaymakers who will find their money does not go as far in summer break destinations from California to the Costa del Sol (LSE: 0NJP.L - news) .

It is also likely to push up some shop prices as imported goods will cost more for British consumers.

UK companies will also find that materials they buy, for example in dollars, will be more expensive.

However, the fall in the pound could make some British goods cheaper for foreign buyers, helping exports.

The price of gold - a traditional safe-haven during volatility - climbed to a two-year high.

Meanwhile, oil slipped by $3, or 5%, with expectations that the shockwaves from a Brexit will limit global demand.

The reaction was all the greater for markets since they had confidently been pencilling-in a Remain victory on the back of a series of predictions from pollsters and bookmakers - sending the FTSE 100 and the pound higher in Thursday trading.

The billionaire currency investor George Soros warned earlier this week that the pound could go as low as $1.15 in the event of a Leave vote.

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